Cryptocurrency billionaire with Malta plans sued in Hong Kong over funding deal

A cryptocurrency billionaire feted by Malta’s government after announcing his $3 billion exchange would move to the island, is being sued over a funding deal gone awry.

The legal dispute in Hong Kong is between Zhao Changpeng, founder of the world’s largest cryptocurrency exchange Binance, and a unit of Sequoia Capital.

The filings shed light on how Zhao’s has valued Binance, the exchange he started just nine months ago, landing him on the cover of Forbes magazine and helping him amass a personal fortune he claims is $2 billion.

According to the Hong Kong court filings reported on Bloombergh, Zhao and Sequoia began negotiating terms of an 11% stake investment in Binance in August, valued at $80 million.

Talks continued over the next few months as cryptocurrency prices soared to all-time highs. But in mid-December, as Bitcoin traded at a record near $20,000, the negotiations broke down when Zhao’s team told Sequoia that Binance’s shareholders believed the deal undervalued the exchange.

It was at around the same time that Zhao was approached by venture capital firm IDG Capital with an offer of two rounds of funds at higher valuations: $400 million and $1 billion, respectively.

“At issue is whether Zhao’s talks with IDG Capital violated his exclusivity agreements with Sequoia,” Bloomberg reported. While Sequoia and Zhao are planning to settle their dispute in arbitration, the disagreement became public after Sequoia turned to Hong Kong’s High Court and secured a temporary injunction barring Zhao from negotiating with other investors.

Zhao has previously told Bloomberg News that Binance doesn’t need outside money and that he’s only interested in partnering with venture capital firms if they can help the exchange work with regulators to secure operating licenses.

As the world’s most popular cryptocurrency, Bitcoin has lost about half its value since hitting an all-time high in mid-December.

Zhao insists Binance is valued at about $3 billion and that the company earned $200 million in its second quarter of existence, while declining to share the exchange’s financial statements or provide proof of his personal wealth. Zhao keeps the locations of Binance’s offices and servers secret, though he has previously said that the exchange is based in Hong Kong. He also announced that Binance was setting up operations in Malta.