Crypto fund backed by Bill Ackman is shutting down after its founder… disappears

Last May, David Gan sent a cryptic email to investors at Inception Capital, his venture capital firm specializing in blockchain. In it, Gan claimed that his father, a retired senior Chinese government official, was being investigated and that he would travel to China. Afterwards, according to investors interviewed by , he remained silent.

The investors, or limited partners, had trusted Gan for a reason. In 2019, Gan, then 28, was included in Asia’s 30 Under 30 list for his performance as managing director of Huobi Labs, one of the world’s largest cryptocurrency platforms, where he helped incubate and invest in cryptocurrency projects. blockchain. He left the company in 2021 to raise his first $50 million venture fund, and received support from big names like Bill Ackman, Alan Howard, Y Combinator CEO Garry Tan, and Galaxy, before closing a second $30 million fund-of-funds vehicle in 2024. According to Securities and Exchange Commission (SEC) filings, Inception manages nearly $100 million in assets.

But Gan’s investors were angered by his apparent disappearance during the second quarter and, due to his absence, voted to close the fund. In late June, in the midst of vote counting, Gan reappeared and shortly thereafter agreed to step down from certain key responsibilities within the company. Now, while Inception is still working with its PLs on developing a transition strategy, the incident reflects the ongoing risks investors face in the volatile cryptocurrency sector, especially companies with international ties.

“During my absence, when I traveled to China to help my father navigate a complex situation, the team as a whole did an incredible job serving our PLs and portfolio companies,” Gan explained in a statement shared with . “Today, the fund is thriving and I have been back to my day-to-day role for months. From day one, everything we have done and plan to do has been in the best interests of our PLs.”

OP Crypto

Gan raised Inception’s first fund during the last major cryptocurrency bull cycle in 2021, when Bitcoin and Ethereum prices had soared and deep-pocketed investors were lining up to invest in untested venture capital firms.

Although Gan had never managed his own fund, he was well versed in finance. In 1999, he moved from China to the US, beginning his college education at Lehigh University in 2008, where he earned a bachelor’s degree in financial mathematics, before returning to Shanghai to work as an analyst at Morgan Stanley Huaxin Securities. After a few years of working in China’s growing tech scene, he joined Huobi’s in-house venture arm, leading investments for its venture capital fund and managing the operations of its fund of funds.

Gan’s proposal for his own fund, originally called OP Crypto, was to unite the two worlds where he grew up. In a 2021 interview, Gan stated that the US needed to take advantage of Asia’s cryptocurrency capabilities, including its advertising capacity and its broad user acquisition opportunities. “We had an advantage,” he remembers. “There are no Asian-backed institutional funds in Western markets.”

The argument worked. Gan later told TechCrunch that the targets were family offices and high-net-worth individuals seeking ‘diversified’ exposure to early-stage cryptocurrency venture capital businesses. “Instead of family offices trying to make the best investments themselves, this vehicle is a good hedge and a loss-adjusted venture capital vehicle,” Gan told TechCrunch.

Its new fund has attracted $50 million in investment from major players, from Ackman and Howard to major U.S. cryptocurrency firms such as Galaxy and Digital Currency Group. All declined to comment for this report.

The disappearance

The evidence indicates that Inception prospered. Earlier this year, the fund was strong enough to close a second $30 million vehicle that invested in other cryptocurrency funds. According to Inception’s February SEC filing, the company managed at least $30 million more in assets than it had originally invested. However, one investor told the company that one of the company’s biggest positions is in Merit Circle, a gaming-focused blockchain whose token has seen a sharp drop in value over the year. Inception is also a pre-seed investor in other cryptocurrency projects, including Scroll, the Ethereum layer 2 blockchain, and Elixir Protocol, the cryptocurrency exchange liquidity network.

Gan’s May email, along with his apparent disappearance soon after, set off alarm bells among Inception PLs. An investor attempted to obtain details about Gan’s whereabouts from Inception’s remaining employees, who reported that the only communication they received had come from Gan’s lawyer. Others were left in the dark, although some commented that they found it strange that Gan had decided to share the initial details of his father’s investigation.

According to a public notice issued by the Central Commission for Discipline Inspection, the supervisory body of the Chinese Communist Party, and dated April 17, 2024, Gan’s father was a member of the Party Committee and deputy director and first-level inspector of the Department of Public Security of Hubei Province, a senior position responsible for state affairs and governance, which has gained even more importance during COVID — Hubei’s capital is Wuhan. The statement said he was under investigation for “serious disciplinary and legal violations.” There is no indication that the investigation is related to cryptocurrencies.

Inception informed its PLs 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 his investors or through social media. A spokesperson for Inception Capital declined to comment.

The company’s PLs responded to Gan’s mysterious absence by voting in favor of a controlled liquidation, meaning Inception would continue to manage its existing investments in the fund’s original term but would not call the remaining 25% of capital into its first fund. The company characterized the process as a “harvesting period”. The vote, however, coincided with Gan’s reappearance in June, when he apologized for his absence and agreed to relinquish his role in managing or trading the fund’s multi-signature portfolio.

The future of Inception is now uncertain. A snapshot of the company’s website from April reveals that the team has been reduced in recent months, with four of its eight employees leaving, although Inception has added two new business analysts.

In a statement shared with , Gan stated that Inception plans to formally present a plan to its PLs in October, allowing them to continue to invest through the company with the remaining 25% of capital that has not yet been called, although they also have the option not to participate. One investor told the company he hoped Inception would continue investing.

“We look forward to continuing to add value to our investor and builder ecosystem in the coming years,” said Gan.