The startup, called Prodeum, had billed itself as a developing a system to use blockchain technology for agricultural commodities, like fruits and vegetables.
But Prodeum caused waves online Sunday evening after trying to sell tokens to investors through a risky fundraising technique and subsequently disappearing from the web, leaving only the word “penis” on its homepage.
In the end, the company appears to have raised only an almost comical grand total of $11 from investors in its initial coin offering, or ICO. But the bizarre incident highlights the chaos and risks lurking in the unregulated world of cryptocurrencies, as well as some of the unexpected dangers that are likely to become more common as interest in cryptocurrencies continues to surge.
Darius Rugevicius, Vytautas Kaseta, and Mario Pazos were all listed as team members or advisors on TokenDesk fundraising page for Prodeum.
While fake founders are a common trait among questionable cryptocurrency startups, Rugevicius, Kaseta, and Pazos all actually work with blockchain startups. All three expressed concern to Business Insider that the Prodeum scam could have an negative impact on their reputations.
Their photos and names were posted on the original website, along with links to active LinkedIn profiles. A fourth team member, Petar Jandric, does not appear to be linked to a real person.
All traces of Prodeum, a startup on the Ethereum blockchain, have been wiped from the internet, and its homepage now redirects to an anonymous Twitter account.
‘It could be some Russian based scammers. But we can’t confirm this yet.’
Rugevicius, a general partner at Connect Capital in New York, was at the airport Monday morning on his way to South Korea for a conference hosted by the blockchain company ICON.
“I have personally worked with number of most prominent projects in blockchain field and certainly have no ties with this project,” Rugevicius told Business Insider.
Pazos, a Miami-based blockchain startup advisor and angel investor, said he didn’t know about Prodeum until he was contacted for this story. He advises the blockchain startups WaBi Project and Kairos, and is closely involved with both of their ICOs.
An ICO is an unregulated fundraising technique used by blockchain companies where cyptocurrencies like bitcoin and ethereum are used to purchase “tokens” from a startup. In theory, the tokens will be valuable if the company takes off, though many people buy random digital tokens in the hopes that they can trade them like stocks.
Though he said he hasn’t thought much about scams until this happened to him, Pazos said that he takes the legitimacy of the companies that he works with very seriously, and has turned away clients that he didn’t feel confident would succeed in the space.
“We run a very thorough due diligence process and interview with the CEO and their team. In fact, we have face to face interactions. I make sure that they’re legitimate companies,” Pezos said, adding that he also looks at companies’ financials to make sure they are not struggling to make ends meet.
Kaseta, a Lithuania-based blockchain engineer and advisor, said he and Rugevicius are looking into taking legal action against the alleged scammers. He also said he is working with the crypto community to find the people behind the Prodeum.
“From the first information, looks like it could be some Russian based scammers. But we can’t confirm this yet,” Kaseta said.
Though Prodeum ultimately raised just $11, the company originally set out to raise 5,400 ether, or $6.5 million. The project goal was to “bring fruits and vegetables to the blockchain.” It may sound silly, but tracking produce from farm to store is one of the more practical uses of blockchain technology, with companies like IBM and Walmart partnering on similar projects.
Reprinted from Business Insider