Greetings, Leo Schwartz here today. Try as I might, I can’t stop stumbling into strange stories in the world of crypto venture capital. By all accounts, the sector is thriving, especially compared to the rest of VC. Liquid tokens mean that investors are actually seeing returns, firms are raising new capital, and startups are attracting funding. But this is crypto, after all. Something always goes wrong.

David Gan had a winning hand. As a young hotshot at Huobi, one of the largest crypto exchanges, he earned a spot on the Forbes 30 under 30 Asia list in 2019, soon leaving to raise his own venture fund, originally called OP Crypto. This was the halcyon days of 2021, when everyone was throwing checks around, and Gan signed on heavy hitters like Bill Ackman, Garry Tan, and Alan Howard as limited partners to his new $50 million fund.

OP Crypto, which rebranded this year to Inception Capital, has fared well, including closing a $30 million fund of funds in early 2024 and growing its assets under management to nearly $100 million, according to the firm’s most recent SEC filings. But in May, Gan sent out a mysterious email to his LPs. His father, a retired high-ranking Chinese government official from Hubei, where Wuhan is located, was under investigation. Gan would be traveling to China to help out. That was the last investors heard from him for over a month.

I began to hear rumblings during Gan’s apparent disappearance from confused LPs, who voted in his absence to do a controlled wind-down of the firm. In the middle of the tally, Gan returned, agreeing to relinquish key responsibilities in the firm. And now, Inception is at a crossroads, with the firm continuing to steer its holdings but agreeing not to call the remaining 25% that has yet to be invested.

Inception told me that they plan to formally introduce a plan in October that would allow its LPs to invest the remaining capital, though it may not be the most appealing option for a firm that has had a tumultuous few months. Inception also let half its staff go after pausing its investments, though it has since hired new deal analysts.

There is no indication that the investigation into Gan’s father had anything to do with crypto—you can view the public notice here—but the often fraught connections between China and the U.S. seem to impact every aspect of the blockchain industry, from mining to pig butchering. And Gan’s pitch to his investors was all about bridging the Western crypto world with Asia. As Inception’s LPs decide on the next steps for the firm, the gamble may no longer be worth the risk.

You can read my full story here.

Leo Schwartz
Twitter: @leomschwartz
Email: [email protected]
Submit a deal for the Term Sheet newsletter here.

Nina Ajemian curated the deals section of today’s newsletter.

This story was originally featured on Fortune.com