Binance Labs returned external investors' capital over summer

Binance Labs, the mammoth venture arm of the under-fire crypto exchange, paid money back to external investors in a $500 million fund over summer.

In June 2022, Binance Labs announced a new $500 million fund, Binance Labs Fund II, to invest in web3 projects — marking the first time one of its venture funds had taken money from external backers. DST Global Partners and Breyer Capital were named as investors among other unnamed institutions, although Binance itself still contributed the bulk of the $500 million.

A significant chunk of the contribution made by outside backers or Limited Partners (LPs), however, was returned over the summer, according to three people familiar with the matter. One of those people said that of the total $150 million invested in the Binance Labs fund by LPs, close to half was repaid. That capital had yet to be deployed into startup investments, they added.

A spokesperson for Binance declined to comment. 

Regulatory pressure

Binance Labs has emerged as one of the largest venture investors in crypto off the back of the exchange operator’s success.

It was formed in 2018 to pour Binance’s excess profits into startups and by April this year it had grown into an investment and incubation arm with $9 billion in assets, according to statements made by company spokespeople at the time. It has backed over 200 projects and, as of April, had delivered returns on paper of more than 10 times what it had invested.

It is unclear exactly why the venture unit repaid its LPs. 

Yibo Ling, then chief business officer at Binance, said in April that the regulatory pressure faced by Binance in the United States “doesn’t really touch Labs in any way.” Yet even in April there were signs that Binance Labs was doing less deals in the U.S. — and the pressure has been cranked up considerably since then.

Yesterday, Binance’s co-founder and CEO Changpeng 'CZ' Zhao, agreed to step down as part of a plea deal with the U.S. Department of Justice. He pleaded guilty to violating and causing a financial institution to violate the Bank Secrecy Act, agreed to a $50 million fine and may yet face prison time. Binance veteran Richard Teng was named as his successor. Binance itself will pay a mammoth $4.3 billion fine for violating money transmission laws and U.S. sanctions. Attorney General Merrick B. Garland slammed the company, stating that it “did more than just fail to comply with federal law — it pretended to comply.”

A team in flux

Binance Labs has been led by Yi He, a co-founder of Binance alongside Zhao, since August 2022. It has suffered a string of executive departures over the past few years, including those of Bill Qian, its former head, and Nicole Zhang, an executive director.

Ling — who, as recently as April had led M&A and investments at Binance Labs in addition to his role as Binance’s chief business officer — also left the business in recent months, according to his LinkedIn profile.