Zhao Changpeng, CEO of the currency security company, sued Sequoia Capital, claiming that the venture capital company’s ban on him in 2017 unfairly exploited a “loophole” in Chinese law, which caused inappropriateness to his reputation. Damage.
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“I won, but the impact of this case is very big. It was a crucial period in the market, when other venture capitalists and investors were very interested in the currency.”
SCC Venture VI, a subsidiary of Sequoia Capital China, sued Zhao Changpeng in 2017, alleging that he violated the “exclusive” agreement and sought investment from another company, IDG Capital, in the A round of financing. Sequoia Capital unilaterally obtained a three-month ban on the financing of the currency – the ban was unilaterally obtained, and did not give the opportunity to defend itself or publicly disclose its response. Zhao Changpeng believes that this has caused damage to the currency security in the key growth period.
This unilateral ban was later identified by the court as “abuse of the procedure” and subsequently dismissed. The court asked Sequoia Capital to pay Zhao’s $779,043 in litigation costs while paying its own $2.4 million in legal fees.
Now Zhao Changpeng took Sequoia Capital to court and demanded a compensation. He wrote on Twitter:
"Even after winning the case, I can't disclose the results, but the matter I was sued was immediately disclosed. This is a loophole in the legal system. I have to counterclaim before I can publish the results."
Zhao Changpeng believes that this case reflects a bullying mode, which is caused by loopholes in the company law.
"For most entrepreneurs, they can't prepay $779,000 for a lawsuit; they can't get extra money for their startups if the lawsuit is pending, even if there is a lawsuit that obviously has no reasonable basis and the plaintiff will lose. ""
“It’s also distracting to have a lawsuit in the entrepreneurial process. Many start-ups have no choice but to make concessions to the unfair terms or practices of venture capital firms (a very well-known venture capital firm).”
The first hearing for this case will be held in Hong Kong on June 25. At present, Sequoia has not yet responded.
The following is the content of this lawsuit issued by Zhao Changpeng on Twitter yesterday:
Here are a few points to mention. Most of you may not know the final result of my struggle with Sequoia Capital, but it is now open. In short, the arbitral tribunal dismissed all allegations of Sequoia Capital.
I won, but this case is too destructive. First of all, Sequoia Capital issued a ban on me to prevent me from financing the currency at the end of 2017. At that time, it was a critical moment in the market. Other venture capitalists and investors were very interested in the currency.
The ban and the serious allegations against me by Sequoia Capital were made public, but since the arbitration was confidential, I could not publicly defend myself.
The Hong Kong court later determined that Sequoia Capital’s ban was an abuse of the procedure. At the end of last year, the arbitral tribunal finally ruled that all the claims of Sequoia Capital were unfounded.
Sequoia Capital (China) paid $2.4 million in legal fees for this, but eventually lost the case. I had to pay $779,043 in advance for my legal expenses for the past year. Finally, Sequoia paid the fee because they lost, but I still need to pay the fee in advance.
The lawsuit stated a few points. For most entrepreneurs, they can't prepay $779,000 for a lawsuit; they can't get extra money for their startups if the lawsuit is pending, even if there is a lawsuit that obviously has no reasonable basis and the plaintiff will lose.
It is also distracting to encounter a lawsuit in the process of starting a business. Many start-ups have no choice but to make concessions to unfair terms or practices of venture capital firms, a very well-known venture capital firm.
Even if I win the case, I can't disclose the result, but the fact that I was sued is immediately disclosed. This is a loophole in the legal system. In order to disclose the results, I had to go to court with Sequoia Capital again.
For VCs, this strategy is effective in most cases. This is a tool they are legally acquired. This is the weakness of our legal system and the unprofessional behavior of VCs. VCs should help entrepreneurs. I don't know how many such examples are there.
We should not just defend. We need to fight for our cause.
Finally, for today's entrepreneurs, fortunately, there are other options. Welcome to the world of fundraising based on blockchain.