The U.S. government is probing whether a venture capital firm with ties to high-profile tech investor Peter Thiel has engaged in financial misconduct, Recode reported today.

Sources who spoke with the publication on condition of anonymity said that officials hailing among others from the Federal Bureau of Investigation have been interviewing people close to Mithril Capital Management LLC. Launched in 2012, Mithril Capital counts Peter Thiel among its three original co-founders. The billionaire investor also contributed a significant portion of the firm’s initial capital but is reportedly not involved in day-to-day operations.

Mithril is said to have over $1.2 billion in assets under management. It’s headed by managing partner Ajay Royan (pictured), who was also in the firm’s founding team.

A Mithril spokesperson told Recode that the company’s attorneys have been in contact with government officials and described the situation as a “foiled plot by a self-serving ex-employee.” The spokesperson was further quoted as saying that “there are no allegations from any government agency.”

Federal officials are not the only ones reportedly concerned about the possibility of financial misconduct. According to some of the anonymous sources cited in the exposé, investment firm Cambridge Associates LLC is also investigating to see if there has been any mismanagement at Mithril. Its interest in the matter is being attributed to multimillion dollar contributions that several of its clients made to a Mithril-run startup fund.

General manager Ajay Royan has overseen a number of notable investments over the last few years. Mithril’s portfolio companies include Palantir Technologies Inc. and surgical robotics startup Auris Health Inc., which was was acquired in February for $3.4 billion. But today’s report indicates that not all of Mithril’s bets turned out well: the firm reportedly made a previously-unpublicized investment in uBiome Inc., a bankrupt biotechnology startup now under federal investigation.

Mithril is said to have lost seven employees since the spring of 2016 amid internal tensions. The current staff reportedly consists only of Royan and two other people, with the tipsters adding that investors are expressing dissatisfaction with the pace at which the team is deploying their capital. The insiders indicated that Mithril over the years invested only a small portion of its $1.2 billion-plus war chest.

If there’s indeed a federal probe into the firm, it would mean the mounting government scrutiny of Silicon Valley has now reached the venture capital community as well. Major tech firms are currently facing concurrent investigations from most of the state attorney generals in the U.S. as well as the Justice Department, Federal Trade Commission, European Union and German privacy authorities. There are also multiple class-action cases going through the courts including a recently approved lawsuit over Facebook Inc.’s privacy practices. 

Photo: Christopher Michel