Crypto venture capital giant invests heavily in Toncoin, but the arrest of the founder has caused market volatility

The recent detention of a cryptocurrency founder in France has sparked a storm in the crypto venture capital space. A number of well-known investment institutions have previously invested in Toncoin, a digital token closely related to the messaging app.

It is reported that more than a dozen institutions such as Pantera Capital Management, Animoca Brands and Mirana Ventures have invested in Toncoin. The blockchain network behind the token is used to process transactions such as instant payments. Pantera, one of the largest crypto venture capital funds, invested more than $100 million in Toncoin earlier this year, according to people familiar with the matter.

The inflow of money stems from a fascinating vision: the messaging app is poised to evolve into a WeChat-like digital asset "super app". Its 900 million users will rely on Toncoin for everything from payments to blockchain gaming. From February to early July this year, the price of Toncoin soared 4 times, and the total value of stakes on its underlying blockchain, TON, (TVL) exceeded $1 billion at one point.

However, the founder's recent detention on charges of not doing enough to combat crime in the app exposes the associated risks. On August 29, he was charged with participating in the dissemination of illegal content and conniving at other criminal acts. The company issued a statement saying it complies with European law.

Toncoin plunged about 20% after the founder's arrest on the outskirts of Paris on August 24 before rebounding. According to DefiLlama data, TON's TVL has dropped to $573 million.

! Bloomberg: Crypto Venture Capital Buys TON at a 6% Discount, Still in a Profitable State

Lasse Clausen, founder of crypto venture capital firm 1kx, said: "Most investors believe that the app itself will greatly drive the adoption of the Toncoin network. The situation now is that a black swan event happened to the company and its founders and could raise questions about the future. "

Venture capitalists who have invested heavily in Toncoin ( usually promise not to sell for at least a year ) are now assessing whether the actions of the French authorities will lead to the loss of users. The app's popularity in crypto circles is largely due to its lax governance, but it also bogged down the founders in legal trouble.

Pantera said Toncoin was its largest single investment, but did not disclose the exact amount. The TON Foundation says it has never raised funds. Animoca Brands did not comment, and Mirana Ventures did not immediately respond.

Some proponents remain bullish on the outlook. DWF Labs co-founder Eugene Ng said the crypto market maker spent "millions of dollars" to increase its holdings after Toncoin crashed.

For VCs, token investing has several advantages over traditional equity, such as faster exits. Usually the tokens start to be unlocked after 12 months, and investors can sell them gradually. Clausen, founder of 1kx, said that token volatility also allows backers to have a more complete picture of the project's progress.

Token trading often involves significant discounts. It is reported that Pantera bought Toncoin at a price 40% below the market price. At an average price of $6.32 in May, the investment is still profitable.

! Bloomberg: Crypto Venture Capital Buys TON at 6% Off, Still in a Profitable State

However, token investment is also highly risky. The May 2022 collapse of the TerraUSD stablecoin is a case in point. Previously, investors such as Three Arrows Capital had just spent $1 billion on Luna tokens, but Luna instantly went to zero, triggering a series of crypto company failures.

This incident once again highlights the high-risk nature of cryptocurrency investment, and investors need to carefully evaluate the project's prospects and manage risks.