The fate of Binary Capital is now in the hands of its limited partners.

Over a tumultuous weekend, Justin Caldbeck’s leave of absence from Binary Capital has turned into a permanent departure, a second close of $75 million has been put off, and the incoming new partner Matt Mazzeo has announced he won’t be joining the firm after all.

That leaves just the firm’s co-founder Jonathan Teo (a long time friend of Caldbeck’s) and a team of about four more junior employees.

As Axios’ Dan Primack has reported, Caldbeck’s departure triggers the so-called “key man” provision in an LP agreement, giving the LPs the ability to remove their capital and shut the firm down if they chose to. I’m hearing from sources that those conversations are going on right now. In fact, at least one LP was already conducting their own investigation into the rumors about Caldbeck’s treatment of women in anticipation of The Information’s blockbuster story, published last Thursday.

We’ve had a lot to say about Caldbeck’s part in this. As we’ve reported, not only did Calbeck have a clear pattern of sexually harassing, groping and propositioning Asian women in professional contexts, but more stories have come to light of him treating other female and male investors poorly.

Then there’s the desperate attempts at a coverup. Over the weekend we published an email sent by Caldbeck to LPs and portfolio companies ahead of the Information’s story in which he denies all the claims made against him - claims he later admitted were true and has apologised profusely for.

We also revealed this weekend that Caldbeck seemingly made a last ditch effort to silence one of the women, Niniane Wang, by sending her an email asking if her company was looking for funding just days after she had agreed to speak on the record about her experiences with Caldbeck and Binary.

So much for Binary’s original statement that “there is no evidence that any of [Caldbeck’s] investing decisions were affected by his social interests.”

In short, Caldbeck has more issues than “just” his horrific treatment of women. He has repeatedly lied to his LPs, portfolio and the public. The question is whether he was lying to his partner Jonathan Teo as well.

That’s certainly what Teo wants you to believe. From his statement:

“I trusted my partner and it is clear that I shouldn't have. The predatory behavior Justin has been accused of is deplorable, and there will be zero tolerance at our firm of any conduct that is demeaning to women.”

[Update: He posted a second statement on Facebook this morning, just moments after we first published this article. In it, he now acknowledges that he did know about Caldbeck's "bad behavior" and they'd explicitly talked about it, but he was assured that was in the past.

I have known Justin in a professional context for many years. I have also heard rumors about him from the past. When I chose to work with him to form Binary, I told him in no uncertain terms that no bad behavior was ever going to be tolerated at Binary. He was getting married that summer and I had full belief that he was turning over a new leaf. I got to know his family. They are wonderful. And he promised me that he had changed. I saw it in his eyes and I believed it. I spoke to entrepreneurs and I had not heard one single first-hand account of his bad behavior. I held him to that commitment to me. I saw in his eyes he had that intention. I believe in seeing the best in people. I love that there is something I can learn from everyone, and I always look for that. I made a big mistake in that from a professional context. The corporate world is unforgiving for judgment errors such as this. And I truly understand it. In the second year of our partnership, I had learned of some bad behavior from my partner, but it was evidenced to me that it happened prior to his time at Binary. And I kept my word that his past is the past and I would put it behind me. Even if he had kept it from me.

If we are to believe this version of events-- and it's now the fourth or so that the firm has trotted out since this began-- it's all the more strange that Binary Capital insisted he'd done nothing wrong in its first statement to the Information. You knew he'd done it before, but still tried to descredit these reports? Even threated publications chasing them with legal action?]

While Teo may not have known the full extent of Caldbeck’s most recent treatment of women, it’s incredible to imagine he’d never heard any of the rumors surrounding Caldbeck’s behavior at his previous firm, Lightspeed, that lead to the firm selling off some of a portfolio company’s shares, and reportedly the mutual decision for Caldbeck and Lightspeed to part ways. [Update: Per the above statement, it now seems likely he did know.] As Dan Primack noted, rumors of Caldbeck’s behavior were “an open secret” in Silicon Valley. So much so that someone Tweeted this in the wake of the Information’s story:

Thx for your courage @susan_ho @niniane @leitihsu I was at Duke at same time as [he] was; I'm also AsianAmerican. I need not say more. — Laura Huang (@LauraHuangLA) June 23, 2017

I was in the same place with him and am an Asian woman: I need not say more.

Best case scenario Teo is telling the truth, and he’s the worst person at due diligence in the industry. Another case of men in the venture industry believing that systemic misogyny and harassment is merely a "phase" that men go through, whether in their early 20s as the case with Evan Spiegel's emails or in your 40s in the case of Travis Kalanick. [Update: We now know he did know.]

Worse case, this is another one of Binary Capital’s shifting, false statements about their awareness of, and thus culpability in, Caldbeck’s behavior. [Update: This is now the best case scenario.]

Worst case, and this is informed by deeply off the record conversations I’ve been having these past 24 hours, is that getting rid of Caldbeck only partly solves the deep institutional problems at Binary.

(Judging by those same conversations, it’s only a matter of time before we get an answer on that last scenario. If you have anything to share, on or off the record, email me)

"Time" is actually what Teo is pleading for in his most recent statement:

There is an investigation pending right now by a law firm that is one of the best at what they do because I take it seriously that I have been misled by someone whom I considered a trusted friend. I am not quick to judgment here and want to do this properly. But time has not been on my side in this. The world is quick to judge. Rightly so. There is so much to be outraged about in the current world we live in and this allows us to drive massive change and move on to the next issue to be outraged about. Because there is so much that is damaged in the world. I am outraged at the way in which we are forced to drive change. I am outraged by so much. I ask for your forgiveness. But I ask of you to give me the time and the chance to do what's right. I am pressured from many sides right now to take action without the proper consideration. I need to do what's right for my investors, my entrepreneurs and my staff, because they have trusted me.

One thing we know for certain that Teo was aware of, and a participant in, was Binary Capital’s famous party culture...

[Update: Third image removed at the request of the copyright owner.]

Moreover, I have spoken to sources who explicitly warned limited partners against investing in Binary because of the firm’s culture: The parties, the treatment of women, the bro-atmosphere. Indeed, I’m told that several LPs passed on the firm for this reason.

But here’s the truly horrible part: I’ve also heard from sources that some other LPs invested because of party culture at Binary. Their logic: That the founders’ party lifestyle would lead to superior deal flow in young San Francisco. That it was just another sign of their “hustle.” Boys will be boys!

Here’s the more euphemistic description of that in the New York Times when Binary closed their second fund last summer

As they did in their previous roles, Mr. Teo and Mr. Caldbeck will take what they call a “scrappy” approach to finding companies with real potential. “The deals we want to do aren’t already in play,” said Mr. Teo, who was an early investor in Snapchat. “We want to make them happen.”

Or as TechCrunch put it euphemistically at the time of the firm’s second fund: “A youthful spirit flows through Binary Capital. It’s what helps it spot the next big social startups.” And: “Raising $175 million for a new fund isn’t as hard as you might expect…as long as you have a glowing recommendation from Snapchat’s Evan Spiegel.” This was an article about Binary backing “runaway trains” or companies with traction that don’t quite know how to properly scale and harness that activity into professionally managed entities. You could argue that positioning was a bit of projection on the part of the firm.

And look at the deals that got Caldbeck and Teo so much attention at previous firms: Snap and Tinder. Neither were a partner on those deals, they were too junior, but they both have received credit for “working on them.”

One way or another, it seems increasingly likely at this point that Binary will be dissolved. There are two “red buttons” LPs can push: One is the so called, “No fault termination” where 70% of the capital would have to agree to suspend the fund and bring in someone else to manage it out or shut it down completely. The other is invoking the key man provision, now that Caldbeck has left.

I’ve reached out to several of the fund’s limited partners, including Weathergage Capital, Legacy Venture, and UNC asking explicitly if these issues came up in their due diligence and if Binary’s culture impacted their decision to invest.

I’ve also asked whether it impacts their decision to remain invested in the firm now that Calbeck’s behavior is public knowledge and they can trigger the key man provision if they chose to. After all, they no longer have any plausible deniability over what they are invested in.

Legacy Venture is particularly interesting to watch: It’s known as a “do-gooder” firm that gives its proceeds to charity, and was already a jarring fit with Binary to some in the industry. A source tells me that Legacy even pulled funds from (Pando investor) Founders Fund after the firm invested in Cyan Bannister’s Zivity. Naked women! Consensual behavior! The horror!

It is incredibly rare for LPs to shut down a venture firm in Silicon Valley history. But there is some precedent. In 2010, Bay Partners had a “key man” leave, and the firm was suspended while a new partner was brought in to manage out the rest of its assets. Right now, Teo is certainly financially motivated to keep Binary alive-- the firm is getting millions of dollars in management fees that, as of this weekend, he no longer has to split with another partner. “It’s kind of extreme to shut down a fund,” said someone in the industry who wouldn’t speak on the record and is not an investor in Binary. “That’s probably what he’s counting on.”

People close to the situation have described LPs as teetering on the edge of whether or not to invoke the key man. If nothing else comes out about Binary -- particularly anything implicating Teo in behavior similar to that admitted by Caldbeck -- it’s likely that Binary stays alive, my sources say. But if anything else does come out, that will change things dramatically.

What does this matter outside one small, bro-y firm and its victims? Even if Binary is shut down, it seems likely that the two partners will wind up in plum new jobs at some point. And it’s a certainty that in venture firms across Silicon Valley, this kind of harassment of women will continue to take place, whether Binary gets burned to the ground or not.

But here is why this story is so important: It digs one level deeper on why the Valley has such a systemic culture of sexism.

Over recent years at Pando, we’ve traced this all the way through the Valley food chain: From Stanford’s unwillingness to take simple measures to combat campus sexual assault and its business school’s creepy misogynistic video, through companies like Uber whose board members can’t even stop making sexist jokes long enough to get through a meeting about its investigation into its sexist culture. We’ve talked about how firms like Binary prey on female entrepreneurs at the moment they are trying to raise capital, driving many out of the industry or at a minimum, disheartening them.

We’ve talked about how venture firms with even one female investing partner back double the number of female-founded companies. And we’ve talked about how most white men in tech-- both investors and founders-- simply don’t prioritize diversity in Silicon Valley: According to one recent study, only 5% consider it a top problem, only 25% have programs actively working to improve it. But what we haven’t yet examined and became clear in my reporting this weekend is the role that limited partners are playing in perpetuating and rewarding a hard partying, bro culture.

LPs face some of the same pressure that VCs face. Globally, there is far more money that wants to invest in top Silicon Valley venture funds than can get in. If you can’t be in, say, Sequoia or Benchmark, the next best thing is to get into the next up and coming firms, and because of its connections to Snap and Tinder, Binary was considered one of those.

If you say no over something as puritanical as treating women with respect, do you ever get another shot at the table? And if you pull your funding right now and dissolve Binary Capital, do you take on some sort of Mike Moritz-level curse, where he was shut out of Facebook after his “treatment” of Sean Parker at Plaxo?

Portfolio management theory-- whether on the part of VCs or LPs-- means the smart thing to do when you realize you have a toxic asset is to just let it ride and not make waves. But that doesn’t mean it’s the right thing to do.

There’s no doubt LPs who heard rumors of Caldbeck’s behavior and backed Binary anyway bear a lot of culpability here. The question is what they do now. Do they correct that mistake and risk being cut out of future deals? And do the press and other venture capitalists in the industry who have widely denounced Caldbeck’s actions continue to hold their feet to the fire?

Venture capital is the lifeblood that pours through Silicon Valley, and it starts with the LPs. Until they stop embracing and celebrating bro culture as a way to get better “deal flow,” no other efforts to change the culture here will be able to take root.

For LPs like Weathergage Capital, Legacy Venture, and UNC, this is a chance to send a message.