Soundchain dapp reveal raises red flags
The sudden, unannounced launch of a crowdsale for an Ethereum Classic dapp called Soundchain raised red flags yesterday, due to its similarities to fraudulent ICO scams.
Responding via Twitter, Soundchain chief operating officer Petr de Canzaparca has since halted the crowdsale countdown. It is not clear whether the countdown, pictured above, was merely a test or actually intended to announce an initial coin offering, or ICO.
Soundchain’s website and Twitter feed, chockablock with sketchy details, drew complaints on social media. “Our economics team estimates that Soundchain is going to be responsible for half of #ETC transactions in the next year, or two,” the organization claimed.
While the development team touted its outsized achievements, the product website was plagued with typographical errors and dead links. “Your site has broken links and looping links,” wrote Twitter user TrackODay. “[T]he whitepaper is not a whitepaper. #SCAM.” Soundchain’s COO appeared to shrug off the criticism. “Just as I said, someone decided to make my job more fun and showed the site a bit early,” replied Canzaparca.
Ethereum Classic Slack channel readers, investigating the website, could identify none of Soundchain’s developers on social media. After some searching, we managed to make contact with advisor Alex Fork, whose work on the Ethereum-based startup Humaniq earned him coverage on the Coinfox publication. “I need some time for decision,” he replied.
Why should investors be wary of crowdsales where developers neglect to do their due diligence? Here we will review two ICO scams from last October that targeted our credulity.
In early October, a dev team going by the name Unicorn ETC took to Reddit to advertise a predictions market ICO based on Augur’s open source software. Unicorn proposed to fork Augur, linking to an overview on their Github page, though none of their team members appeared to be listed on social media sites.
Running the images through pattern recognition software, Ethereum Classic developer Cody Burns discovered that the photo of Unicorn’s front end developer, credited as “Ben White,” actually belonged to a Johns Hopkins medical student of a different name. Confronted with this inconsistency, Unicorn took their website offline and disappeared.
The Unicorn scam was lacking in sophistication and debunked in a matter of hours. But sure enough, a much more elaborate ruse arrived just later that month. Describing itself as a more decentralized approach to Ethereum’s The DAO, the BorgDAO began hyping a crowdsale to fund a virtual investment firm running on the Ethereum Classic blockchain.
Run by Austrian development group Livant Labs, BorgDAO’s team was comprised of a lead developer, systems architect, business strategist and Dapp engineer. Redditors were quick to point out that none of the team members could be identified on social media sites like Facebook and Linkedin. Others were less cautious about exercising skepticism.
The whitepaper written by BorgDAO CEO Andreas Schütz was detailed enough to convince the organizers of a Las Vegas cryptocurrency conference to invite him to present at the event. The presale garnered coverage from the ETHnews, Cointelegraph and International Business Times. The BorgDAO team set a presale target of 300 Bitcoins, which they would accept in return for BRG tokens, to be distributed at a later date.
After the presale ended, the BorgDAO closed down its Twitter feed and Reddit account, disappearing from view. Having named itself after the villainous ciphers from the Star Trek universe, this touch appeared in retrospect to have been forecasting their true motives all along.
The precedent set by the BorgDAO should provide ample evidence that Ethereum Classic investors must proceed with caution. The ruse was persuasive enough to fool professional publications, conference organizers and their intended target, unskeptical crypto investors. In the months ahead, economic incentives are likely to usher in a new era of more ambitious scams.
In a court of law, the accused is presumed innocent until proven guilty. But in the free market, a product should be perceived as having no worth until it has proven its merit. For Ethereum Classic to be great as an open platform, the community must be vigilant in countering attempts by thieves and opportunists to compromise our reputation.
Calls to give Soundchain the benefit of the doubt assume the team is well intentioned. Is this in fact the case? The developers’ exaggerated claims and ill-prepared documentation do not reflect much in the way respect for the intelligence of the Ethereum Classic community. For Soundchain to convince us of their legitimacy, they have their work cut out for them.
