DWF Labs quietly launches investment arm amid ‘frustrating’ criticism of crypto investments

• DWF Ventures, launched in April, will focus on “traditional venture financing deals.”
• The company’s cash injections bear little resemblance with traditional VC transactions.
• DWF Labs backed 13 projects between January and April, making it this year’s funding leader.

DWF Labs quietly launched an investment arm amid criticism over its unorthodox funding strategy.

The new investment arm, dubbed DWF Ventures, was launched in April without much fanfare, save for a post on self-publication platform Medium and some tweets.

DWF Ventures will focus on “traditional venture financing deals,” DWF Labs Partner Stefano Virgilli told DL News.

“The mandate is to do fundamentals-driven investment only with either token or equity rounds,” he said.

‘Fixed percentage of profits’

DWF Labs declined to divulge details about how much DWF Ventures has to spend, only saying that “it is a fixed percentage of DWF Labs’ profits,” which “we don’t want to disclose.”

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DWF Ventures operates under DWF Labs DMCC, a Dubai entity announced in March, Virgilli said. DWF Labs has a presence in Singapore, Switzerland, the United Arab Emirates, and the British Virgin Islands.

The development comes after DWF Labs’ investment in the crypto space outpaced investment giant Andreessen Horowitz and matched those recorded by Coinbase’s venture arm Coinbase Ventures at the start of the year.

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DWF Labs backed 13 projects between January and April, according to DefiLlama data, making it a leader among the hundreds of investors who poured close to $2.8 billion into crypto projects across 284 venture capital deals, community fund raises, token sales, and public equity offerings.

However, reports from The Block and CoinDesk in April suggest the company’s cash injections bear little resemblance with traditional venture capital transactions.

‘It is a bit frustrating from our perspective that somebody starts questioning everything that we do’

The reports noted that the firm called itself a global web3 investment firm and market maker, but it acted more like an over-the-counter trading desk. It bought millions of dollars’ worth of projects’ tokens, drip-feeding capital into the projects over the span of several months, according to those reports.

Virgilli said DWF Labs’ strategy to buy tokens over time was a way to ensure that the deal was fair to both the projects and the market maker. Instead of agreeing on a price for a token at the start, the parties would agree that DWF Labs could, for instance, buy $100,000 worth of tokens for the daily price on each day for 100 days, which would add up to $10 million being invested at the end.

While it’s hardly unheard of for market makers to invest in projects — both Jump Crypto and Wintermute have launched similar initiatives — they usually separate those two parts of the business. The criticism expressed in the reports suggested that DWF Labs had blurred the line between its core business and its investments.

The wrong idea

Virgilli rejected the criticism and saw nothing wrong with its investment strategy.

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“It is a bit frustrating from our perspective that somebody starts questioning everything that we do,” Virgilli said. “They come up with absolute speculation on [the] source of funds and all the rest because they don’t like that we use the word investment.”

Virgilli partly blamed the projects it invested in for the controversies, saying that they announced the deals without checking in with DWF Labs first, which had given the industry and the media the wrong idea.

“They want to jump on the media and announce to the rest of the world that we are working with them,” he said.

When stories have been picked up by the media, the backing has often been portrayed as straight-forward investments. Instead of calling them investments, DWF Labs referred to the deals as “long-term financial support” and “strategic partnerships.”

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DWF Labs has imposed strict guidelines on how the deals are communicated, including going over announcements with its compliance team to ensure partners use “the correct terminology,” Virgilli said.

The reports also highlighted its relationship with Swiss affiliate Digital Wave Finance, which it described as “one of the world’s largest high-frequency cryptocurrency trading entities,” but one that has little online presence.

Virgilli said that the affiliate’s lack of a major online presence is due to it not needing to woo clients as it being “a trading entity using its own proprietary funds, not raising funds through third parties.”

DWF Labs is led by managing partner Andrei Grachev, who previously worked at Huobi Russia.

Do you have a tip about DWF Labs, investments or another story? Reach out to me at eric@dlnews.com.

Update: This story has been updated to include a correction in the caption of the picture to say that DWF Labs was founded in 2022. Its affiliate DWF was founded in 2018.