Reports have emerged that Zhao Changpeng, the founder of Binance– the largest cryptocurrency exchange in the world, has denied the allegations made by a unit of Sequoia Capital in a Hong Kong lawsuit that concerns a business deal that has gone bad.
What did Sequoia say?
Sequoia initiated legal action against Zhao as they claimed that he had violated the exclusivity agreements that required that Zhao should not talk to other potential investors while the deal with Sequoia was still underway. The parties had intended to settle their dispute in arbitration. However, the details became public after Sequoia approached the High Court of Hong Kong to secure a temporary injunction against Zhao that prohibits him from engaging in negotiations with other investors.
The court stated that the injunction would have been set aside had it still been in effect after Zhao challenged the injunction.
Binance wrote in a statement,
“As the substantive issues in dispute between the parties are subject to confidential arbitration proceedings, Zhao will make no further comment on the matter.”
What is the genesis of the case?
This case has its roots in the collapse of negotiations regarding investment by Sequoia in Binance. The VC firm approached the court after the talks failed. Apparently, Sequoia had valued Binance at $ 80 million and this had made the shareholders of Binance unhappy. According to Sequoia, Zhao had engaged in negotiations with a firm called IDG Capital, and they had obtained the temporary injunction to bar Zhao from doing so.
It is reported that IDG Capital had offered two cash injunctions of $ 400 million and $ 1 billion in valuing Binance far higher than Sequoia.
Binance has stated that the ‘ex parte conjunction’ was obtained without informing Zhao. The court, however, has set aside the previous judicial order after Zhao appealed against it.
“[T]he High Court of Hong Kong has now determined that this injunction should not have been granted, as it had been improperly obtained and constituted an abuse of process by SCC (Sequoia Capital China).”
Binance also announced the Sequoia had been ordered by the Hong Kong High Court to pay for the legal expenses incurred by Mr. Zhao. According to the exchange, the two parties will continue to work to settle the dispute in arbitration.