The most "lavish" crypto venture capital firm GEM Digital: a covert and bizarre capital game

Author: Gu Yu & Biscuit, Chain Catcher

As the cryptocurrency market remains sluggish and venture capital firms slow down their investment frequency, a new emerging venture capital firm has attracted considerable attention in the industry with its high-frequency investment pace and exaggerated investment amounts. This firm is GEM Digital.

In the past six months, GEM Digital (and its related fund GEM Global Yield) has invested in at least 16 cryptocurrency projects, with single investments exceeding $100 million in projects such as Venice Swap, Naetion, KaJ Labs, Unizen, and H2O Securities. The total committed investment amount has surpassed $1.6 billion, likely exceeding that of any other cryptocurrency venture capital firm.

List of cryptocurrency projects invested by GEM this year

Just today, GEM Digital announced a $35 million investment commitment to the blockchain travel ecosystem project Travel Coin. Following the announcement, the project's token price surged by about 50%. However, Chain Catcher reporters also discovered that the token has experienced a linear decline of over 95% since its issuance, and the current diluted total market value remains below $5 million even after today's increase. Why is GEM Digital investing $35 million in a project with such a low market value?

This phenomenon is not isolated. Several projects previously invested in by GEM Digital exhibit similar characteristics. For instance, on May 18, KaJ Labs announced a $400 million investment commitment from GEM Digital Limited, yet the diluted total market value of the project's token LITHO was only $4.7 million. Additionally, projects like Peculium and Energi have shown similar trends.

Moreover, most of the projects invested in by GEM Digital have low industry recognition and lack significant highlights in their business models. Furthermore, almost all of GEM Digital's investments are made independently, without collaboration with well-known venture capital firms, making their approach quite peculiar.

So, is GEM Digital just a naive firm with too much money? Why spend large sums on projects with market values far below the investment amounts? The catch lies in the term "investment commitment."

Unlike most financing news where investment firms directly announce investments to project parties, GEM Digital typically announces investment commitments in its news releases. Literally, an investment commitment refers to the project party's promise to invest a specific amount, but it does not necessarily mean that the funds will actually be provided. In one of GEM Digital's investment announcements, the project party stated that the investment was not a direct investment but would be based on milestones and performance to ensure optimal use of funds.

However, according to an interview with a project leader from a cryptocurrency project, the so-called "investment commitment" has many shocking insider details. The project leader stated that GEM Digital had contacted the project via email and promised to invest $50 million, but upon signing the investment contract, she found that the firm stated in the contract that it would not directly transfer funds but would instead cover the investment amount with profits obtained from selling the tokens.

In other words, GEM Digital's investment agreement resembles a collaboration for market manipulation and profit-sharing, where both parties sign a so-called massive investment agreement to create positive market news, then collaborate to manipulate the market for profit-sharing. Based on the performance of tokens from GEM Digital's past investments, this appears to be the case, ultimately leaving users to bear the cost of the investment.

According to Coinmarketcap data, after the financing news was released, the price of the LITHO token quickly rose from around $0.008 to $0.016, but ten days later, it plummeted to about $0.0013. Other tokens exhibited similar price trends.

Price trend of LITHO token over the past two months; GEM Digital's investment date was May 19

"This is essentially using the media to manipulate the community," the aforementioned project leader stated. "I feel that projects cooperating with them will end up badly." Most of GEM Digital's investment news is published on platforms like Yahoo Finance and PR Newswire, but it has also been reported by mainstream cryptocurrency media such as Coindesk and Cointelgraph. Due to the bizarre and strange actual insider details, it can be said that a significant portion of the cryptocurrency media world is kept in the dark.

Regarding such tactics, GEM Digital is not the originator but rather follows the practices of its parent company, Global Emerging Markets (referred to as GEM). Official information states that this is an alternative investment group valued at $3.4 billion, managing a series of investment tools focused on global emerging markets, having completed over 500 transactions in 72 countries, with offices in Paris, New York, and the Bahamas.

Specifically, the company invests in minority equity investments and control acquisitions, covering many traditional sectors such as environmental technology, pharmaceuticals, agriculture, energy, and real estate development, but the companies it invests in are largely unknown. Among them are several Chinese companies, including China Timber Resources Group Ltd, China PetroTech, and Heng Xin China Holdings Limited. Searches reveal that there is very little information available about these companies, and Heng Xin China was forcibly delisted years ago.

Of course, GEM's investment style is also characterized by large sums, with most investments ranging from tens of millions to hundreds of millions of dollars, and its total investment amount far exceeds the claimed $3.4 billion. The term "investment commitment" also frequently appears in most investment news.

In summary, GEM-affiliated institutions often prefer to invest in projects with low recognition and mediocre business development, primarily adopting the unconventional and low-threshold investment method of "investment commitments." They leverage the notoriety they have built over time to reach a tacit collusion with project parties in need of positive news, jointly creating a series of covert and bizarre capital games, which requires vigilance and caution from all parties in the cryptocurrency industry.