L2 Capital Taps Newton to Tokenize $500 Million in Pre-IPO AI Shares

Hong Kong's L2 Capital Joins Newton as Founding Partner

L2 Capital, a Hong Kong technology investment firm, has become the founding partner of Newton Labs' tokenization platform, which is still under development. The firm aims to tokenize $500 million worth of holdings in late-stage, pre-IPO technology and AI companies within 24 months of the platform launching. The announcement was shared exclusively with The Defiant. Most of the companies behind the tokenized holdings have not been named yet. Newton Labs co-founder and CTO Dennis Won said details about the pipeline will be revealed closer to launch.

Compliance Built Into Each Token

Newton's platform takes a different approach from most tokenized asset projects. While many enforce compliance checks only once at issuance or by whitelisting specific wallets, Newton writes investor eligibility rules, lock-up periods, holding limits, and transfer restrictions directly into each token. The platform then checks every transfer, loan, or other supported action against those rules before settlement. This ongoing enforcement is something fund managers require before they allow private-market positions to be used as collateral on decentralized finance lending markets, according to the announcement.

How the Platform Works

Newton Protocol, the authorization layer powering the platform, is further along than the tokenization product itself. It is built as an EigenLayer AVS, which is a type of decentralized validation network. Developers write compliance rules using a language called Rego, checking signals such as sanctions screenings, KYC status, and spending limits. An operator network evaluates each transaction, and the result is enforced at the smart contract level. Newton works with most EVM-compatible blockchains, including Ethereum, Base, and Arbitrum, with support for non-EVM networks listed on its roadmap. Won compared the transfer restrictions to a bank blocking card transactions in unauthorized locations. The platform is also designed to keep institutional policies confidential while still allowing regulators and auditors access when needed.

Investor Access and Asset Structure

Each token would represent an interest in a separate investment vehicle that holds the underlying shares, kept off the sponsor's balance sheet. That vehicle is the registered shareholder in the company. Neither Newton Labs nor the platform holds investor assets directly. Participation is restricted to institutional and professional investors in licensed jurisdictions. Eligible investors would be able to hold positions onchain and borrow against them in permitted DeFi lending markets. "We want eligible investors to access investments that have historically been out of reach, and to borrow against those holdings without having to sell," Won said.

Why Lending Has Been Slow to Adopt

Tokenized equity has not yet reached the lending markets Newton is building for. Tokenized stocks grew 395% in the year to September 28, reaching $3.17 billion, but only about $81 million, or 2.6%, sits in lending markets as collateral, according to a RedStone report published this month. Tokenized private equity grew even faster at 935%. Lending protocols say they are hesitant because of redemption timelines and off-hours pricing. Pre-IPO shares carry both challenges more sharply, since there is no public-market reference price to rely on. Newton's token, NEWT, was trading at $0.0458 on Tuesday, down 94% from its June 2025 peak, with a market value of $9.8 million, according to CoinGecko.

About Newton Labs

Newton Labs was formerly known as Magic Labs. It sold its embedded wallet business to Kraken parent Payward in July and rebranded around its protocol. The Newton Protocol entered mainnet beta the same month. Its first product, VaultKit, enforces policy on DeFi vaults using RedStone, Webacy, and vaults.fyi. Kevin Lee, co-founder and partner at L2 Capital, said: "Investors in our holdings want to know the rules are being followed, not take our word for it. That is why we chose Newton." L2 Capital invests across venture, pre-IPO growth, tactical, and public-equity strategies, and manages capital for institutions and family offices through a licensed affiliate. Its venture arm, L2 Iterative Ventures, backs early-stage blockchain infrastructure.

What's Next

The platform is still being built. Won said the next milestone is bringing the first tokenized offering live, with timing to be announced as the team gets closer.

Sources

• The Defiant