The founder ad CEO of Binance, which is arguably the number uno exchange in terms of daily traded volumes, has been slapped with a lawsuit by a division of Sequoia Capital, a venture capital firm. The lawsuit was filed after a deal negotiated last year fell apart. While this has no effect on the operations of the exchange, it highlights how quickly valuations can change in the cryptocurrency market.
Binance, which was started 9 months ago by Changpeng Zhao, conquered a huge chunk of the cryptocurrency brokerage market with lucrative competitions and discounts. In its early stages, Zhao had negotiated a deal with Sequoia Capital for the next round of funding. The deal would give Sequoia capital a 11% stake in Binance, based on a valuation of $80 million. The negotiations continued for the next few months.
In December, amidst the soaring crypto prices, the Binance team informed Sequoia that the latter’s proposal is undervalued. In the meanwhile, venture capital firm IDG approached Zhao and offered funding to the tune of $1.40 billion in two tranches of $400 million and $1 billion. This triggered the problem between Zhao and Sequoia, which believed the Binance founder has violated the exclusivity agreement.
While both parties had planned to settle the issue through arbitration, the problem came to limelight when Sequoia approached Hong Kong court to secure an injunction barring Zhao, whose personal wealth is now valued at $2 billion, from negotiating with any other investor. IDG Capital had explained that it has no connection with Binance.
Last month, Binance announced that it will open office in Malta, after it faced trouble with Japanese regulators.
