The Hot-Selling Founder of an $80 Million Crypto Fund Mysteriously Disappeared in China. Investors Voted to Shut It Down—When He Resurfaced
Last May, David Gan sent a mysterious email to investors in his blockchain-focused venture capital firm, Inception Capital. Gan informed them that his father, a retired senior Chinese government official, was under investigation and that he would be traveling to China. After that, according to investors who spoke with him, Luckhe was silent
Investors, or limited partners, backed Gan for a reason. In 2019, 28-year-old Gan named He was named to the 30 under 30 Asia list for his work as CEO of Huobi Labs, one of the world’s largest cryptocurrency platforms, where he helped incubate and invest in blockchain projects. He left in 2021 to raise his first venture fund of $50 million backed by top names including Bill Ackman, Alan Howard, Y Combinator CEO Garry Tan and Galaxy before. close the door a second $30 million fund in 2024. According to Securities and Exchange Commission filings, Inception has nearly $100 million in assets under management.
But Gan’s investors were angered by his apparent disappearance over the summer, voting in his absence to shut down the fund. In late June, amid vote counting, Gan resurfaced and, shortly thereafter, agreed to relinquish some key responsibilities at the company. Now, as Inception continues to work with its LPs to figure out a transition strategy, the incident reflects the continuing risks investors face in the volatile cryptocurrency industry, especially in companies with foreign ties.
“During my absence when I returned to China to help my father resolve a complex situation, the entire team did an incredible job serving our limited partners and portfolio companies,” Gan said in a statement shared with Luck“Today, the fund is thriving and I have been back in my day-to-day role for many months. From day one, everything we have done and intend to do has been in the best interests of our limited partners.”
OP Cryptocurrency
Gan raised Inception’s first fund during the last major crypto bull cycle in 2021, when Bitcoin and Ethereum prices were soaring and wealthy investors lined up to put money into unproven venture capital firms.
Although Gan has never run his own fund, he is very knowledgeable about finance. He moved to the United States from China in 1999, starting college at Lehigh University in 2008, where he earned a bachelor’s degree in financial mathematics, before returning to Shanghai to work for Morgan Stanley Huaxin Securities as an analyst. After working in China’s booming technology sector for several years, he joined Huobi’s internal venture capital department, leading investments for the internal venture capital fund as well as managing the venture capital fund’s operations.
Gan’s pitch for his own venture capital fund, initially called OP Crypto, was to bridge the two worlds he grew up in. In 2021 interviewGan said the United States needs to tap into Asia’s crypto resources, including its advertising machine and vast opportunities to attract users. “We have an advantage,” he said. “There are no institutional funds backed by Asia in the Western market.”
The pitch was a success. Gan later recounted According to TechCrunch Gan said it is targeting family offices and high-net-worth individuals who want “diversified” exposure to early-stage crypto venture capital deals. “Instead of family offices trying to make the best investments themselves, this vehicle is a good hedging and risk-adjusting vehicle,” Gan told TechCrunch.
His new fund has attracted $50 million in investments from leading players ranging from Ackman and Howard to prominent U.S. crypto firms Galaxy and Digital Currency Group. All declined to comment for this story.
Disappearance
By all accounts, Inception has thrived. Earlier this year, the fund did well enough to close a second $30 million fund that invests in other crypto funds. According to Inception’s February SEC filing, the firm has at least $30 million more in assets under management than it originally invested, although one investor said Luck that one of the company’s largest positions is in Merit Circle, a gaming-focused blockchain whose token has fallen sharply in value this year. Inception is also a seed investor in other crypto projects including Ethereum’s Layer 2 blockchain Scroll and crypto exchange liquidity network Elixir Protocol.
Gan’s May email, along with his apparent disappearance shortly afterward, set off alarm bells among Inception LPs. One investor tried to get details about Gan’s whereabouts from remaining Inception employees, who responded that the only communication they had received was from Gan’s lawyer. Others were clueless, though some said Luck They found it strange that Gan decided to share the initial details of his father’s investigation.
According to one public announcement April 17, 2024, from the Central Commission for Discipline Inspection, the watchdog of the Communist Party of China, Gan’s father is a former member of the Party Committee and deputy director and first-level inspector of the Hubei Provincial Public Security Bureau, a high-ranking position tasked with state and governance issues that have become even more important during the COVID era—Hubei’s capital is Wuhan. The notice said he was under investigation for “serious violations of discipline and law.” There is no indication that the investigation is related to cryptocurrency.
Inception told its LPs that Gan had traveled to China to voluntarily assist in his father’s investigation, beginning a period in which he was unable to communicate directly with investors or via social media. A spokesperson for Inception Capital declined to comment further.
The company’s LPs responded to Gan’s mysterious absence by voting for a controlled liquidation, meaning Inception would continue to manage its existing investments according to the fund’s original timeline, but would not raise the remaining 25% of its first fund. The company described the process as a “harvest phase.” However, the vote coincided with Gan’s reappearance in June, when he apologized for his absence and agreed to relinquish the ability to manage or transact with the fund’s multi-signature wallet.
The future of Inception is now in doubt. snapshot The company’s website from April shows the team has been downsizing in recent months, with four of its eight employees leaving, although Inception has added two new trading analysts.
In a statement shared with LuckGan said Inception plans to formally propose a plan to its LPs in October that would allow them to continue investing through the firm with the remaining 25% of capital that has yet to be raised, though they can also opt out, one investor said. Luck that they hope Inception will continue to invest.
“We look forward to continuing to add value to our ecosystem of investors and builders for many years to come,” Gan said.
