The American billionaire Peter Thiel more than tripled his investments with a Government-funded partner, which itself returned close to nothing.
Former economic development minister, Steven Joyce, has confirmed a report from The New Zealand Herald that Mr Thiel's Valar Ventures ended its five-year partnership with the New Zealand Venture Investment Fund in October by activating a buyout option.
The option allowed Valar Ventures to make about $30 million dollars from its input of between $7m and $9m, while the fund returned about $10m from the same input, Mr Joyce said.
Mr Joyce said the buyout option was created under the Labour Party and was no longer in use.
"This is what was intended by the fund's architects back in 2002. It acted as they designed it to do so - which is giving people the option to buy out the government partner so that they can continue on with their investments without any government support."
Only two investors ever took up the option, which was created to encourage market activity, Mr Joyce said.
Mr Thiel was granted citizenship under exceptional circumstances in 2011.
Documents released by the Department of Internal Affairs showed he had only visited New Zealand four times and had no intention of ever living here.
Last week, the Venture Investment Fund told RNZ that Mr Thiel's decision to invest in the partnership had nothing to do with him gaining New Zealand citizenship.
The partnership was finalised in December 2011 - just a few months after he gained citizenship - and publicly announced in March 2012.
In a written statement, a Venture Investment Fund spokesman said the partnership with Valar Ventures was "the result of discussions, negotiations and due diligence over quite a few months through 2011".
"We don't normally comment on the commercial negotiations we have with any of our investment partners as these are subject to confidentiality agreements, but citizenship was not a factor and was never discussed," the spokesman said.