Chinese crypto whale announces investing hiatus
Famed crypto investor Li Xiaolai announced that he was withdrawing from all further blockchain related investments in a Weibo post — Weibo is a tremendously popular Chinese micro-blogging platform, analogous to Twitter — on September 30th.
One of the most prominent Chinese investors in the cryptocurrency space, Li is the founder of Bitfund, which he stated in 2013 with only $3.5 million assets under management. Li is a former teacher who claims to be the first individual in China to begin publicly, as opposed to privately, collecting Bitcoin. The fund has since grown to be one of the largest and most influential forces in the blockchain industry, in China and Globally. A translation of Weibo’s message by Technode is below:
“From this day on, Li Xiaolai personally will not invest in any projects (whether it is blockchain or early stage). So, if you see ‘Li Xiaolai’ associated with any project (I have been associated with countless projects without my knowledge, 99% is not an exaggeration), just ignore it … I plan to spend several years to contemplate on my career change. As for what I’m doing next, I’m not sure just yet.”
Li’s story has long captivated the crypto-community. Li’s rapid rise has made him a magnet for controversy, and market insiders have long speculated as to the true size of Li’s Bitcoin holdings. Some in the industry speculate that Li may be sitting on a stockpile of hundreds of thousands of coins. Li was a notable figure in China before his initial crypto forays, making his name publishing two books which went on to become bestsellers. One book covered mastering English vocabulary and the other dealt with time management strategies.
The announcement of Li’s withdrawal from the space is slightly ambiguous, and the statement does appear to allow Li the possibility of returning to blockchain investing at some point in the future. While the announcement says that Li will no longer invest personally in projects, it also leaves the window open for Li to invest via a fund, syndicate, or institution.
Li has been involved with a number of blockchain-related projects over the past few years and has used his high public profile as a potent tool for raising funds. In addition to founding Bitfund, Li setup Yunbi, a Chinese crypto-exchange that at one point was one of the world’s largest exchanges by volume. Yunbi was forced to cease operations in September of 2017 in response to the crypto-trading crackdown initiated by the government.
Li’s announcement follows several controversial incidents over the past few years. Earlier in 2018 Li left his position at the Hangzhou Xiong’An Blockchain Fund after a series of public mishaps and scandals. The Hangzhou Xiong’An Blockchain Fund was seeded with approximately $1.4 Billion USD at launch. After a public spat with another prominent Chinese crypto investor, Chen Weixing, Li left his position as managing director of the fund serving for only a few months. Chen called Li a “tumor” on the space, and alleged that Li stiffed a group of investors out of nearly 30,000 bitcoins.
One of Li’s most recent controversies occurred in early July this year, when a close to fifty-minute recording of Li discussing the crypto markets in striking terms was released to several Chinese news sources. In the recording Li voraciously slammed several of the biggest players and projects in the space and discussed his strategy for hyping projects and manipulating retail demand for coins.
Another source of controversy was an ICO led by Li, which raised approximately $82 million in the fall of 2017. The ICO was designed to fund the launch of Press.one, which aimed to build a fully decentralized content distribution platform. The ICO raised funds from slightly over 14,000 participants. While the headline number raised was impressive, the ICO fell far short of its $200 million funding goal. Investors across the crypto community raised concerns about the projects unusual structure, as well its lack of a technical white paper.
The recent turmoil surrounding Li’s career has all taken place against the backdrop of a blanket government ban on crypto trading by the Chinese government. A report by Chinese media in May heavily criticized the proliferation of ICO related scams in China. In the report Li pushes back against several projects and scams that he alleges have improperly used his name in their fundraising efforts. Li’s Weibo announcement hints that his decision to withdraw from the industry is at least partly due to his name being used for fraudulent fundraising initiatives.
Despite the government ban, reports indicate that the crypto industry is still alive and well in China, albeit operating underground. Many of the original Chinese exchanges have redomiciled outside of the government and have continued operating. Tether, P2P transactions, and other tools allow Chinese investors continued access to the crypto ecosystem, and shell companies are allegedly being used both to disguise trading and to manage ICOs and fundraising rounds.