In brief

  • An early Binance investor claims the exchange is undervaluing its shares to avoid making a large payment.
  • The firm should be worth at least $10 billion, but Binance says it's worth $600 million.
  • However, Binance's company structure makes it difficult to launch a legal case.

An early Binance investor is preparing to sue the popular crypto exchange for allegedly mispricing his equity valuation, according to local news source WuBlockchain.

Investor Weixing Chen claimed to have purchased 5% of Binance’s shares when the firm was starting out in October 2017. At the time, Binance marked itself at a $70 million valuation, meaning Chen—and a small group of other investors—invested over $3.5 million in the promising startup.

But in the months after, the exchange took off and quickly become one of the world’s largest crypto exchanges, trading billions of dollars in volume daily. 

The frenzied activity eventually catapulted Binance’s valuation to a significantly higher value than its $70 million figure, with the report stating it’s closer to about $10 billion in 2020, similar to US crypto exchange Coinbase, based on activity, users, and trade volumes.

But Binance reportedly refused to price his shares at that valuation when Chen went to cash out. Instead, the firm offered to repurchase his shares in installments at a marked-down valuation of approximately $600 million, instead of the $10 billion.

A Binance spokesperson told Decrypt, "Binance token investors and equity investors have received high returns on their investments."

The report added there are similar other instances regarding Binance’s valuation. “There are still many equity disputes about Binance, and the core reasons are all related to the blind financing in July 2017. This includes accepting Sequoia’s investment intention but repenting, and promising multiple consultants [with a] BNB payment but repenting,” it said.

It added that an anonymous source further told Chen that Changpeng Zhao, the founder and CEO of Binance, allegedly said “the company he founded follows the principle of no rights, no entity, no statements, no rights, no dividends, no currency, no repurchase, no transfer.”

Update: Added a comment from Binance.