Binance Labs Returns Money to External Investors from $500 Million Fund
Binance Labs, the venture arm of the embattled crypto exchange, gave back contributions to outside investors from a $500 million fund during the summer. The fund, known as Binance Labs Fund II, was introduced in June 2022 to support web3 projects. This marked the first occasion when one of the exchange’s venture funds received investments from external backers, including DST Global Partners and Breyer Capital.
However, a significant portion of the $150 million invested by external backers was returned, with close to half being repaid. A spokesperson for Binance declined to comment on this matter.
Regulatory Pressure on Binance Labs
Binance Labs has become one of the primary venture investors in the crypto industry due to the success of the exchange operator. The venture unit, established in 2018, had accumulated $9 billion in assets by April 2022. It has backed over 200 projects and generated returns exceeding 10 times its initial investments.
However, the reason for the reimbursement of LPs is unclear. Despite claims in April that Binance Labs was insulated from regulatory pressure, there were indications of reduced deal-making in the U.S. and, since then, regulatory scrutiny has intensified.
Binance’s Co-founder Pleads Guilty
Changpeng Zhao, Binance’s co-founder and CEO, agreed to step down after pleading guilty to violating banking laws and causing a financial institution to do the same as part of a plea deal with the U.S. Department of Justice. Binance itself will pay a $4.3 billion fine for money transmission law violations and U.S. sanctions. The company’s compliance with federal law was harshly criticized by Attorney General Merrick B. Garland.
Challenges for Binance Labs
Yi He, a Binance co-founder, has been leading Binance Labs since August 2022. However, the venture arm has experienced a series of executive departures in recent years, including its former head and an executive director. Yibo Ling, who previously oversaw M&A and investments at Binance Labs, also left the business in recent months.
Hot Take: Binance Labs Fund II Faces Challenges Amid Regulatory Pressures
While Binance Labs was formed to invest in promising startup projects, it faces challenges due to regulatory scrutiny of the broader Binance ecosystem, as evidenced by the reimbursement to external investors and the departure of key executives. The future of Binance Labs Fund II remains uncertain as it navigates significant regulatory pressures and leadership changes within the parent company.
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