Changpeng Zhao, the CEO of Binance, a major crypto exchange has sued a unit of Sequoia Capital over reputational damages. This lawsuit comes after the VC sued Changpeng Zhao after a funding deal went wrong. Sequoia Capital claimed that Zhao had breached a contract. However, the Hong Kong International Arbitration Center dismissed the case against him in December last year. The specific unit that Changpeng is suing is SCC Venture VI.
According to the filing that was submitted to the High Court in Hong Kong, Zhao claims that Sequoia’s claims damaged his reputation. He added that this prevented him from raising money for his exchange at an appropriate valuation. Due to this, Zhao has decided to seek monetary compensation. A report notes that the Binance CEO sent an application through his attorneys for a hearing before the court on an order for “immediate summary of assessment of damages”.
An Investigation to Determine Zhao’s Losses
The lawsuit also demands that an investigation be carried out to find out if Zhao has indeed suffered any damages following Sequoia’s claims. The investigation should also find the extent of the damages. Zhao notes that the VC firm’s actions affected Binance’s fundraising in March last year. He went on to demand that should the investigation find that he sustained any damages, the VC firm should compensate the amount found by the probe.
In the new filing, Zhao said,
The injunction order has caused loss to me for which I am entitled to reasonable compensation by Sequoia. In particular, I have suffered i) a loss of chance to raise capital through successive rounds of financing at increasing high valuations; and ii) damage to my reputation.
The Lawsuit’s Background
This case started two years ago after Sequoia Capital obtained an injunction order in a unilateral procedure without notifying Zhao. The VC firm then filed a notice for arbitration in January last year as a plaintiff against him. Sequoia asserted that Zhao had breached exclusivity after talking to IDG Capital while holding discussions with Sequoia for the Series A round.
Three months later, a Deputy High Court Judge ruled in favor of Zhao. The judge noted,
I agree that the use of the ex parte procedure without notice to D. [Defendant, Zhao] was an abuse of process,
The judge added,
If the Injunction were not already spent, I would have set it aside on that basis alone.
The parties resumed the arbitration process in the following months of 2018. The court made the final decision on December 12 where it dismissed the claims against Zhao. The court found that the Binance CEO was talking with IDG Capital to fund a proposed Series B round.
Reportedly, there have been lags in Binance’s network. These lags have seen the exchange’s customers lament over losing thousands of Dollars in crypto. Prior to this, Binance suffered a hack that saw it lose 7,000 BTC.
Do you think Changpeng will win the case against Sequoia Capital? Let us know in the comments below.
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