Sequoia China, cryptocurrency exchange Binance face off in deal-talks dispute

A Sequoia Capital Chinese fund is facing off with the founder of one of the world’s largest cryptocurrency exchanges in a Hong Kong court over a deal agreement.

A judge in the High Court of Hong Kong determined that an injunction Sequoia obtained, preventing the founder of Binance from entering discussions with any other firms, had been improperly obtained.

Court filings show that SCC Venture VI Holdco G, a special-purpose vehicle of Sequoia Capital China, sued Changpeng Zhao, co-founder and CEO of Binance, one of the top cryptocurrency exchanges by trading volume.

Sequoia alleged that Zhao violated an exclusivity agreement when Binance entered deal talks with IDG Capital.

The question of whether Zhao violated the exclusivity agreement in Sequoia’s term sheet will be settled in arbitration. But the court’s judgments regarding the injunction shed light on the disagreement, which Bloomberg first reported on April 24.

Binance, founded less than a year ago, hosted a total of about $2.3 billion of trading volume in the past day, according to, a website that lists the market capitalization of cryptocurrencies.

The company has changed locations. The firm moved to Japan from China after Chinese regulators cracked down on initial coin offerings and exchanges. Japanese regulators recently warned Binance that it was operating in the country without registration, and the company said in March that it would move to Malta.

The court filing shows that in August 2017, Sequoia China and Zhao signed a non-legally-binding Series A term sheet. The deal was to give Sequoia 10.7 percent of Binance’s shares for about $9.5 million (60 million Chinese yuan) at a premoney valuation of about $79 million (500 million yuan).

Negotiations continued until mid-December, when Binance’s team told Sequoia that its current shareholders and angel investors had said the term sheet’s valuation was too low, the documents say.

In mid-December, the filings say, IDG Capital approached Binance with a Series B investment offer, proposing to invest two tranches.

The first was $10 million for 2.5 percent of the shares at a post-money valuation of $400 million. The second investment was $5 million for a 0.5 percent interest, based on a post-money valuation of $1 billion.

When Sequoia learned of Zhao’s negotiations with IDG Capital, the papers say, Sequoia, whose headquarters are in Menlo Park, California, obtained an ex parte injunction against Zhao in December 2017.

In its April 24 decision, the court declared that injunction to have been improperly obtained.

In an April 25 statement, Binance said that “after a hearing attended by both parties’ legal representatives in April 2018, the 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.

“On this basis, [Sequoia Capital China] was ordered to pay Mr. Zhao’s costs in relation to the legal proceedings. Mr. Zhao denies all of [Sequoia Capital China’s] allegations relating to the present dispute.”

IDG told Bloomberg that it has not invested in Binance and has no relationship with the company. Whether Binance is currently in negotiations with potential investors is unclear.

Binance, Sequoia and IDG Capital could not immediately be reached for comment.

To access the court documents on the injunction, dated March 26 and April 24, click the links below:

SCC Binance April 24

SCC Binance March 26

Photo of gavel on laptop courtesy of Bet_Noire/iStock/Getty Images