The founder of crypto-exchange Binance is being sued for allegedly breaching an exclusivity agreement. The suit stems from a promise of cash made when the platform was first launched 9 months ago.

Who is being sued?

Binance’s Zhao Changpeng is currently facing a lawsuit in Hong Kong’s high court that was brought by venture capital firm Sequoia Capital.

The firm is based in California and has previously backed companies including Google, Airbnb Inc., and Dropbox Inc.

First reported by Bloomberg earlier this week, Changpeng was in talks with the firm over an 11% stake for around $80m (￡57.3m). However, when the price of bitcoin hit record highs of nearly $20,000 (￡14,340)?in mid-December, Changpeng reportedly told Sequoia that the offer would not match the expectation of Binance’s shareholders.

But the company alleges that, while these talks were ongoing, the platform was also in discussion with potential investor IDG Capital, which breached the exclusivity agreement that Binance and Sequoia had agreed on.

Why did it go to court?

Certainly, Binance was hoping the issue would be settled in arbitration, but its going to court means that now the company cannot talk to any potential investors.

This is a huge deal because Binance is currently transitioning to Malta due to the new trading regulations the country is offering. It also means walking away from IDG, which had expressed an interest in Binance over two funding rounds. The rounds were evaluated at $400m (￡287m)?and $1bn (￡720), respectively.

The case is now being in heard by the Hong Kong High Court, a jurisdiction that has not been kind to Binance before, which led to the company’s move to Malta. Sequoia then secured a temporary injunction barring Zhao from negotiating with other investors.

What happens now?

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

He believes that the company is conservatively valued at about $3bn (￡2.15bn); it earned $200m (￡143m)?in its second quarter. He has tried to keep the locations of Binance’s offices and servers secret, although he has confirmed that the exchange is based in Hong Kong.

IDG said, in response to questions from Bloomberg News, that it hasn’t invested in Binance and has no current relationship with the firm.

The rise of the trading platform in a land of virtual currencies has been a fairytale success story that landed Changpeng on the cover of Forbes magazine and increased his estimated personal fortune to as much as $2bn (￡1.43bn). But Binance has also attracted scrutiny from regulators, especially those in Hong Kong, who have been clamping down on digital-asset exchanges around the world because of concerns that the venues may be flouting securities laws. This is a major reason why Binance has announced it will be moving to Malta, which wants to remain friendly to cryptocurrency trading.

According to Coinmarketcap.com, Binance currently hosts around $3.8bn (￡2.72bn) of cryptocurrency trades every 24 hours, despite Bitcoin losing almost 50% of its value since late last year.

Both Binance and Sequoia Capital refuse to comment in public on the case.