Valuation cannot be negotiated, Chen Weixing intends to sue Binance, and Zhao Changpeng strongly responds to "four nos and four nos"?

What is the truth about several public cases surrounding the Binance equity dispute?

At 10 o'clock in the evening on August 31, a circle of friends of Chen Weixing attracted attention. He pointed out that it only took him 5 minutes to decide to invest (Binance) tens of millions of RMB. Three years later, the company's annual revenue is tens of billions, and the profit is hundreds of millions of dollars, but the founder has not given shares for three years.

He also said that the contract, payment records, and chat records are all complete, and tens of millions of legal fees will be spent to file a lawsuit. Chen Weixing told Wu Shuo Blockchain that he is currently preparing materials and preparing to sue Binance.

This circle of friends began to ferment after being spread by Li Xiaolai.

To this, He Yi, the co-founder of Binance, replied: Binance’s token investors and equity investors have achieved high returns, and I would like to thank Mr. Li Xiaolai for his continuous attention to Binance, and Li Xiaolai’s support for Binance on social media. And CZ's personal negative remarks reserve the right to pursue legal responsibility.

On September 1, Chen Weixing said in the circle of friends: The company he founded follows "no confirmation of rights, no entity, no report, no rights, no dividends, no currency, no repurchase, and no transfer." On this basis, Shareholders are requested to "fair commercial negotiation" to solve the problem. If there is any "defamation" of the company, don't blame the company for being rude. This "he" is suspected to refer to Changpeng Zhao, and there is also a saying that "four things and four things" is Zhao Changpeng's request to lawyers. Chen Weixing also told Wu that because the equity of investing in Binance has not been confirmed and transferred, many top overseas funds have paid deposits but cannot purchase them.

Gopax operator Streami completed round B financing of approximately US$23.68 million at a valuation of US$292 million: According to news on May 20, South Korean encryption exchange Gopax operator Streami completed 30 billion won at a valuation of 370 billion won (approximately US$292 million) (Approximately US$23.68 million) Series B financing, ZVC, KB Investment, the venture capital subsidiary of Z Holdings, a joint venture between SoftBank and LINE, participated in the investment, as well as DCG, the parent company of Grayscale, and Strong Ventures. It is reported that DCG became the second largest shareholder of Gopax in May last year.

Earlier news, Gopax has resumed the won market on April 28. (Korea Economic Daily) [2022/5/20 3:31:03]

Zhao Changpeng's "four nos and four nos" did not receive a response from Binance, and it is impossible to determine the authenticity of this reply. It is just a negotiation strategy. In fact, Binance also proposed a buyback plan.

A number of people familiar with the situation told Wu that the blockchain exclusively confirmed that investors such as Chen Weixing entered around July 2017, the time when Binance was founded. Binance’s solution to investors’ withdrawal was cash back in installments. purchase. He told Wu that the blockchain said that Binance, as an unlisted company, can withdraw in cash for all equity investors.

Grayscale’s parent company, DCG, raised $700 million at a valuation of $10 billion: On November 1, Grayscale’s parent company, Digital Currency Group (DCG), raised $700 million at a valuation of $10 billion. America Fund led the investment, and GIC Capital, Rabbit Capital, and Capital G, a private equity investment arm of Alphabet, the parent company of Google, participated in the investment. (Wall Street Journal) [2021/11/1 21:15:57]

The problem is the valuation. It is reported that Binance is only willing to give a valuation equivalent to its annual profit (US$500-1000000000) for installment repurchases, and investors cannot confirm the ownership of shares for transfer, nor can they enjoy profit dividends.

However, most of the other equity investors accepted Binance’s alternative (it is also said to replace the equity with BNB), because these investors each have their own industrial layout. An's support in terms of ecology and currency listing also forced them to choose to compromise. Chen Weixing has mostly withdrawn from the currency circle and is not constrained by this, so he chooses to attack.

German digital bank N26 completes USD 900 million in Series E financing at a valuation of USD 9 billion: On October 19, German digital bank N26 completed USD 900 million in Series E financing at a valuation of USD 9 billion, led by Third Point Ventures and Coatue Management , Dragoneer Investment Group and existing investors followed suit. N26 plans to use the new funds to recruit 1,000 employees as soon as possible, and is not in a hurry to go public. The main market of N26 is in Central Europe, and plans to expand the service to Eastern Europe in 2022. Customers can manage their bank accounts and debit cards through the N26 app. It is very easy to open a bank account without going to a branch to sign various documents. After activation, N26 users will get a virtual card with their own bank account and a card that can be added to Apple Pay or Google Pay. (Tech Crunch) [2021/10/19 20:39:06]

Wu said that the blockchain learned that in July 2017, the valuation given by Binance during financing was less than 500 million yuan. Chen Weixing said that he invested tens of millions and should occupy 5%-10% of the shares.

TradingView completed a financing of US$298 million at a valuation of US$3 billion, led by Tiger Fund: On October 14, the financial analysis platform TradingView completed a financing of US$298 million at a valuation of US$3 billion, led by Tiger Global Management. It is reported that TradingView is a well-known data analysis platform for investment products, which was launched in September 2011. The financial assets involved include stocks, foreign exchange, bonds, futures and cryptocurrencies. Views on TradingView have increased 237% over the past 18 months, and the platform now has 29 million monthly active-ethexc users for its stock charts and services such as data and news. (Bloomberg) [2021/10/14 20:29:12]

What is the current market cap of Binance? Valuation of non-listed companies is indeed difficult. Generally speaking, it is either based on the valuation amount at the time of the last round of financing, or based on the valuation of companies of the same type in the industry. According to the former, Binance is beneficial; according to the latter, referring to Coinbase, which is valued at 8 billion US dollars, is beneficial to early investors.

In addition to equity investors, there are two other public cases surrounding the disputes at the beginning of Binance.

The first is the dispute with Sequoia Capital, the world's largest venture capital. According to financial reports, on August 25, 2017, Sequoia and Binance reached an investment letter of intent and signed it later. Sequoia invested 60 million yuan and loaned 30 million yuan to Binance, accounting for 10.714% of the shares, with a valuation of about 500 million yuan. On December 14, Binance proposed that the valuation of Sequoia was too low.

Sequoia then took Binance to court, protesting that Binance’s investment negotiations with third parties other than Sequoia violated the signed “exclusivity” clause. On December 27, Sequoia applied for an injunction to prohibit Binance from negotiating with other investors, and the Hong Kong court approved the injunction. However, on April 24, 2018, the Hong Kong High Court announced the revocation of the ban in the first-instance judgment.

The difference between Sequoia and the above-mentioned investors such as Chen Weixing is that Sequoia only signed a letter of intent (TS) rather than an investment agreement, and did not make a payment. Therefore, suing with an "exclusive" clause is more of a deterrent. Investors such as Chen Weixing not only signed the investment agreement and made payment, but some even became shareholders in the legal sense.

Interestingly, some of the investments that Sequoia’s “investment ban” helped disrupt Huang may also allow Binance to retain more equity. In the end, Binance only accepted the strategic investment from Vertex Investment, a subsidiary of Singapore's "central enterprise" Temasek, more for a "backer" for working locally.

In another public case, Zhang Li, the former head of Huobi’s business, accused Zhao Changpeng of failing to pay the promised consulting fee written in the white paper. After Chen Weixing released Moments, Zhang Li said: In 2017, the dozens of consultants (each) that Zhao Changpeng ICO pulled were 1/1000th of the tokens. Except for Bao Erye, he cashed in a disguised form, and the others were dumb and ate Coptis chinensis. Of course, this "only voice and recording" does not have a legal contract. He Yi's response to this was "Is there a contract?" and "Legal procedures can be followed."

It can be seen that when Binance was founded in 2017, it was indeed impossible to judge that it would develop so fast. In addition, CZ and He Yi are relatively young and their own financial resources are limited (it is reported that Changpeng Zhao began to take care of the family since he was a teenager. Expenses), so a large amount of equity and platform currency were given at a low valuation in the early stage, but a few months later, the industry began to develop rapidly beyond imagination.

When Binance raised funds in July 2017, the price of Bitcoin was more than 2,000 US dollars. Binance’s finances were very difficult, so it even needed to borrow from Sequoia. Four months later, in November, the price of Bitcoin soared to US$11,000, and with 94 receiving users of competing products, the valuation of Binance skyrocketed. As a result, many subsequent disputes arose.

Similar things actually happened to Bitmain. Bitmain was valued at US$1 billion in 2016, and signed TS with IDG, Innovation Works, Sequoia, New Horizon, etc. In 2017, the valuation skyrocketed, and Bitmain no longer needed money, but still completed a valuation of US$1 billion corresponding investment.

Industry veterans expressed two views on the disputes among early investors such as Chen Weixing.

One view is that it is really unreasonable to disallow transfers and installment buybacks at low prices. But it is not easy for investors to sue legally, because the entity of a cryptocurrency company is very vague, especially a company like Binance that advocates distributed office. We are unable to confirm which overseas entity Binance initially used to contract investors and whether there were restrictive clauses in the contract.

Another point of view is that whether investors or consultants, what they put in is only money, or image, and they don't pay much. The founder of the exchange has assumed the most important responsibilities, obligations and even huge risks of the company's operations. The rapid growth of the company brings huge benefits, and investors seem to have to give in. The logic of some traditional investment industries does not fully apply.

At present, the two sides are still negotiating, and the possibility of future compromise cannot be ruled out.

Tags：

DYDX