Beyond ‘Bitconned’: Unveiling lessons on crypto scamming’s shocking ease

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in Crypto, Fintech

Netflix’s recently released documentary, “Bitconned”, begins with a simple premise – all it takes to kickstart a scam is the creation of a seemingly legitimate company profile on platforms like LinkedIn. 

Further on, the documentary sheds light on the darker aspects of the cryptocurrency market, telling the story of how three individuals manipulated the freewheeling crypto landscape to scam millions from unsuspecting investors.

In the world of web3 and cryptocurrency, scams have unfortunately become a recurring theme, tarnishing the reputation of the sector. The past few years have seen instances such as the FTX fraud case have left a lasting impact, which in turn created a ripple effect that reaches far beyond the fraudulent entities. 

However, for many entrepreneurs in the field, while there currently is a negative light on the crypto industry, it is crucial to remember that these fraudulent activities are the actions of a few and do not define the entire industry. 

“Scammers are found in every sector, but when a single company in the web3 industry raises significant funds and then mismanages it, the effects can be widespread, impacting many people and consequently painting a flawed picture of the whole industry. A case in point is FTX, which was a fraud case, not a crypto case. Centra was similar. Such instances overshadow the positive strides we’ve made in this field – but to a certain extent, it’s understandable,” Marc Taverner, CEO of Swiss cryptoasset financial services firm XEROF, tells IT Logs. 

Those running crypto-related startups themselves face different challenges, Taverner explains.  

As a startup founder, one must always be prepared for the unexpected. It’s prudent to have a contingency fund in place to cushion against any unforeseen circumstances. Additionally, maintaining liquidity is critical, especially if you’re fundraising in crypto. Companies need to ensure they have enough reserves to cover daily operational costs. Nestcoin’s unfortunate incident where they fundraised in FTT and lost all their money after FTX collapsed underscores this point,” Taverner points out. 

A much needed sobering up for the industry

The Bitconned documentary also provides a much-needed sobering insight into the risks of cryptocurrency scams. Just like the process of conducting due diligence on potential investments, investors and other industry players have to thoroughly vet clients before collaborating with them, Mary Pedler, founder of crypto and tech PR Agency INPUT Comms, argues.

“I would start with basic things like checking their project’s website and social media. Objective third-party sources can help verify the team’s claims: for example, Crunchbase provides data on past fundraising, investors, location, and team size, illuminating potential red flags,” she tells IT Logs.

Additionally, Pedler would also search the project and details about its founders anywhere on the Web, especially when it comes to the crypto and web3 spaces.

What goes on the Web, stays on the Web — you’d be surprised what can come up in old forum posts and news comments. I once found out a founder’s real identity that way, and the fact that he had a track record of fraud and SEC fines. Searching in the native language of the team can also unearth relevant content,” Pedler points out. 

When it comes to preventing fraud before it happens, enhanced identity verification by platforms like LinkedIn would help combat imposters, making it harder to impersonate CEOs. Various industry players could also benefit if regulators share intel on scams globally in a timely manner, as more coordination would help shut down the worst actors, making it hard to slip through the cracks.

If the team has zero organic media presence (only promotional paid materials), that’s a major red flag. Some controversy, on the contrary, would mean they’re real people with a history, not fakes. Use your network: ask around. Together, we can crowdsource fraud detection.

Due diligence ain’t fun work, but it is the price of admission in crypto. There’s so much potential if we’re smart — and a little skeptical.” Pedler notes. 

The fundamental Web3 principle: Do Your Own Research

Experts however, also emphasize the resilience of projects that continue building despite market fluctuations. Then there is also the fundamental web3 principle, which goes for everyone that wants to enter the industry in some capacity, and which is web3 101: Do Your Own Research.

For XEROF’s Taverner, the past year has also shown that the crypto industry has recognized the need for regulation and oversight and has taken some strides to address it. 

“In countries like Switzerland, where there are clear rules governing our operations, companies can demonstrate their commitment to working within set guidelines, thereby gaining more trust from investors and stakeholders,” Taverner explains.

While the crypto industry has experienced some setbacks due to fraudulent activities, it’s important to acknowledge that these incidents are not indicative of the industry as a whole, he points out.

With proper regulation, transparency, and financial management, web3 companies can thrive and continue to revolutionize the industry.” 

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