Skip to content

Binance CEO demands discovery from Bloomberg LP via special US law

Zhao Changpeng, founder and chief executive officer of Binance attends the Viva Technology conference dedicated to innovation and startups at Porte de Versailles exhibition center in Paris, France June 16, 2022. REUTERS/Benoit Tessier/File Photo

Register now for FREE unlimited access to Reuters.com

(Reuters) – If you handle complex international cases and you aren’t routinely strategizing about how to capitalize on a US law that allows litigants to petition US courts for discovery related to foreign litigation, you’re probably not doing everything you can for your clients.

The law, Section 1782 of Title 28 of the US Code, permits parties engaged in foreign litigation to ask federal judges to authorize discovery related to their overseas claims. You probably recall that the US Supreme Court shut the door last month on 1782 discovery in private commercial arbitration. But the Supreme Court’s decision only restricts petitions for 1782 discovery in connection with foreign arbitration, leaving participants in foreign litigation free to turn to US courts with requests for discovery.

That they are, and in droves, said Lucas Bento of Quinn Emanuel Urquhart & Sullivan, the author of a 2019 treatise on 1782 discovery. Since 2010, Bento said, the number of 1,782 petitions for discovery has increased by 500%. Every year, he said, he brings more petitions for discovery than the last – and every month, Bento said, he spots new rulings from US judges on 1782 requests.

Register now for FREE unlimited access to Reuters.com

“It’s a huge boom,” said Bento, who is working on an update to his book on the globalization of discovery under 1782.

The latest evidence of the boom in 1782 discovery demands is a July 25 petition in federal court in Manhattan from Changpeng “CZ” Zhao, CEO of the cryptocurrency exchange Binance Holdings Limited. Zhao is seeking documents and depositions from Bloomberg LP and Bloomberg Inc.

Zhao’s lawyers at Sidley Austin contend in the new Manhattan federal court filing that the Binance founder needs evidence from Bloomberg in order to prosecute his defamation suit in Hong Kong against Modern Media Company Limited, a Hong Kong-listed business that is licensed to publish Chinese- language versions of Bloomberg content, including Bloomberg Businessweek magazine articles.

No Bloomberg entity is named as a defendant in the Hong Kong suit, and Zhao has not sued Bloomberg in the US, despite asserting in his 1782 petition that a June 23 Bloomberg Businessweek profile of him “contained several serious and defamatory allegations made against Zhao and Binance that were completely unsubstantiated.”

A Bloomberg News spokesperson said in an email statement on Tuesday that the company would not comment on Zhao’s 1782 petition. Modern Media’s lawyers at Yuen & Partner’s in Hong Kong did not immediately respond to an email query.

Bloomberg is a competitor with Thomson Reuters for news and information services.

Zhao alleges in the Hong Kong suit that Modern Media defamed him by publishing and promoting a translated version of the Bloomberg Businessweek profile. The July 6 Chinese article was headlined “Zhao Changpeng’s Ponzi Scheme.” (Bloomberg Businessweek’s story ran with a different headline, “Can Crypto’s Richest Man Stand the Cold?”)

Bloomberg also sent me a general statement about the Zhao dispute in an email on Tuesday. “We understand that Binance has filed a lawsuit against Modern Media, a company based in China that publishes a Chinese language edition of Bloomberg Businessweek and that published a translated version of a Businessweek story that first ran on June 23,” the Bloomberg statement said. “The lawsuit refers to a headline that was not published in the original English language version of the story.”

After Zhao’s lawyers complained to Modern Media about the “Ponzi scheme” headline and other allegedly defamatory statements in the Zhao article, Modern Media recalled physical copies of the magazine that had circulated in Hong Kong and deleted social media posts that included the “Ponzi” headline , although the Chinese company did not admit wrongdoing.

Zhao, who alleges that the article contains additional defamatory statements, is demanding in the Hong Kong suit a full retraction of the Modern Media version of the story, as well as the publication or a corrective statement or apology.

Zhao said in his 1782 petition that he is entitled under that statute to discovery that will shed light on Bloomberg’s relationship with Modern Media; Bloomberg’s control over Modern Media’s republication of its content; and Bloomberg’s role, if any, in Modern Media’s response to Zhao’s demands for correction and retraction.

I was intrigued by Zhao’s assertion in his 1782 filing that the original story, and not just the Modern Media translation, contained defamatory statements. I asked Binance spokesman Aidan Ryan if Zhao could potentially use any discovery he obtained from Bloomberg through the 1782 action in a subsequent US suit against Bloomberg. “CZ is focused on the litigation against Modern Media in Hong Kong,” Ryan said.

Generally speaking, according to 1782 expert Bento, some litigants do try to use these petitions not just to obtain discovery but for some kind of tactical or strategic advantage. I told you last month, for instance, about a Congressional committee that accused Washington Commanders owner Dan Snyder of “abusing” the statute, seeking discovery via 1782 from perceived opponents in the US based on an allegedly unrelated defamation suit in India. Snyder’s counsel from Reed Smith vehemently denied any misuse of 1782, insisting that Snyder and his lawyers from him only sought evidence related to the Indian litigation.

Bento said federal judges have become increasingly sophisticated about 1782 petitions as these discovery requests have proliferated. 1782 litigation has become vastly more complex, Bento said, with opposing parties from the underlying foreign litigation now often appearing as intervenors to oppose demands for discovery from third parties.

Occasionally, Bento said, courts end up denying petitions improperly. Or judges may impose protective orders to restrict the use of discovery obtained via 1782 petitions, the Quinn lawyer said. In the Zhao case, for instance, Zhao’s lawyers from Sidley said in their brief that Zhao would be open to a protective order if Bloomberg is concerned about controlling access to proprietary information.

As litigation becomes increasingly international, creative lawyers are going to be drawn more often into disputes over 1782 petitions. If you’re not paying attention, you should be.

Readmore:

Did NFL team owner Dan Snyder abuse a discovery law? House committee says yes.

Gibson Dunn lobs accusations at King & Spalding in Mongolian corruption cases

Special Report: How crypto giant Binance became a hub for hackers, fraudsters and drug traffickers

Register now for FREE unlimited access to Reuters.com

Our Standards: The Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

Alison Frankel

Thomson Reuters

Alison Frankel has covered high-stakes commercial litigation as a columnist for Reuters since 2011. A Dartmouth college graduate, she has worked as a journalist in New York covering the legal industry and the law for more than three decades. Before joining Reuters, she was a writer and editor at The American Lawyer. Frankel is the author of Double Eagle: The Epic Story of the World’s Most Valuable Coin.

.

Leave a Reply

Your email address will not be published.