The dispute between Sequoia Capital and Binance has gone public.
According to Bloomberg, Sequoia Capital has sued Binance CEO Changpeng Zhao in Hong Kong because it believes that Binance violated the investment exclusivity agreement.
The lawsuit stems from last August, when Changpeng Zhao and Sequoia Capital began negotiating the terms of the investment in Binance.
According to Hong Kong court documents obtained by the author, Sequoia valued Binance at about $80 million at the time. If the two parties reach a deal, Sequoia Capital will get nearly 11% of Binance.
Negotiations have been going on for several months, but nothing has been reached. At the same time, the price of digital currency has been soaring. By mid-December last year, Bitcoin broke through $20,000, and at this time, the negotiations between the two parties broke down.
On December 14 last year, Changpeng Zhao’s team told Sequoia Capital that Binance’s existing shareholders believed that Sequoia’s proposed offer undervalued the exchange.
At this time, IDG Capital approached Changpeng Zhao and expressed his willingness to inject two rounds of funds into Binance.Their valuations are as high as US$400 million and US$1 billion respectively, which is much higher than Sequoia’s previous valuation of Binance at US$80 million.
This is precisely what triggered Sequoia Capital to sue Binance. According to the Hong Kong courtfile display, The focus of the dispute between the two parties is whether Changpeng Zhao's negotiations with IDG violated his exclusive agreement with Sequoia.
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Sequoia Capital: Agreement exclusivity valid until March 1, 2018
According to court documents, on August 25, 2017, on behalf of He Yi, Sequoia Capital and Binance signed the "Sale of Series A Preferred Stock / BitDJ Limited / Summary of Terms", hereinafter referred to as "Sale of Series A Preferred Stock / BitDJ Limited / Summary of Terms", hereinafter referred to as " Terms").
The "Terms" stipulate that before the maturity date, the two parties will enter into an exclusive cooperation, negotiate and sign the transaction documents for the Series A financing. Without the prior written consent of the holder, the payer shall not make an advance payment before the due date and announce the completion of the A round of financing.
The "Terms" show that the "due date" is six months from the effective date of the agreement, that is, March 1, 2018.
The picture is a screenshot of a legal document
The picture is a screenshot of a legal document
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Binance: Talking with IDG about B-round financing
Regarding Sequoia’s lawsuit, Binance gave a reply in court documents. First, Binance admitted that it did contact IDG Capital on December 14, but what the two parties were talking about was not the A round of financing, but the B round of financing.
The picture is a screenshot of a legal document
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The picture is a screenshot of a legal document
The picture is a screenshot of a legal document
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Hong Kong Court: Further hearings are needed to determine whether Zhao Changpeng is at fault
Regarding whether Binance violated the investment exclusion agreement, the Hong Kong court documents clearly pointed out that the "A round of preferred stock sale terms" does have legal binding force on issues such as "confidentiality" and "exclusivity".
The picture is a screenshot of a legal document
The picture is a screenshot of a legal document
In other words, once Binance introduces other investment institutions within the term of the Sequoia agreement, it will violate the agreement.
Now, Sequoia successfully applied to the Hong Kong High Court for an injunction to prohibit Zhao Changpeng from negotiating with other investors. On April 24, the court also pointed out that further hearings are necessary to determine whether Zhao Changpeng is at fault.
According to the author's query, Binance's last round of financing was in September last year. At that time, Binance received tens of millions of dollars in angel round financing from Fancheng Capital and Black Hole Capital.
At the beginning of this year, Binance registered more than 6 million users, of which more than 97% are foreign users, covering more than 180 countries around the world. Changpeng Zhao also said not long ago,Binance, currently conservatively valued at around $3 billion, made a total of $200 million in the second quarter of its existence.
In addition, Zhao Changpeng said in an interview with Bloomberg this year that Binance does not need external financing now, and he is only interested in cooperating with venture capital companies, provided that they can help the exchange cooperate with regulators to secure operating licenses.
A few days ago, some media said that Binance is seeking a new round of financing, and financing data show that the valuation has reached 10 billion US dollars. However, Binance subsequently denied the news that it was preparing for financing.
As of press time, neither Sequoia nor Binance had publicly responded to the matter, nor had they expressed any opinions.
At present, the Hong Kong court has not made a final judgment on this dispute, and the author will continue to pay attention to the subsequent development of the incident.
