GM!
It’s been a while since I updated y’all with WTF is happening in the trenches. But well, I’m back.
Today, I’m not going to be diving into acronym-related buzzwords that are new in town, but instead, I’m going to walk you through a certain kind of scam that’s been slipping under the cracks.
Without making it sound fancy or sophisticated, here’s the gist: Project teams pitch their ideas to VCs to raise funds—standard stuff. But what’s happening now is a bit more sinister. They’ve been taking products in-house, handing them off to a dev shop, and front-running the whole thing.
In Grantmaster’s words,
“It’s happening ALL THE TIME.”
A dose of reality
Permian Labs’ David Choi recently tweeted about how he’d handed over a VC their USD.AI-related docs. They, in turn, sent the docs to a project they were incubating.
In retrospect, entire sections were “copy pasted” directly from the whitepaper.
The fund in question? “Smaller” than Paradigm, “but still known.”
Copy-pasting tweets is more like a cultural practice in the crypto space. We do it for fun. We do it to lighten up the mood. But vomiting a whole-damn whitepaper? That’s not the spirit decentralization promotes.
They say mimicry is the utmost form of flattery. Choi agrees with that principle. Despite the unfortunate happening, Permian Labs seems to be in a better place now. Choi said,
“Good thing we're pretty much done with the entire execution, just going through audits now. They just lacked any form of originality and [are] still stuck in idea mode.”
I mean, you can’t bet against folks who are slogging day in and out trying to build something from scratch by just copying their stuff. Hard work beats copy-pasta-ing when copy-pasta-ing doesn’t work hard enough.
Everyone is in the same boat
It’s not just Choi and Permian Labs who experienced something like this. Innumerable founders and builders have fallen victim to this trap.
Hesham Aly, the Co-Founder of Elys Network, said,
“We see the same things with Elys Network. We showcase[d] our unique liquidity pools and others have tried to copy the design (unsuccessfully).”
He was, however, quick to add,
“You can copy the idea and you can fork the code, but you can't fork the people.”
Shedding light on the fight against “capital-rich cabals,” Blueberry Protocol Foundation’s Founder Slater Heil said,
“[The] hardest part about making it as a startup founder in crypto is you are fighting very capital rich cabals that want to own the whole stack if possible. And you have to reach a certain too far gone point where they fomo in instead of trying to kill you, to even raise.”
Even though this issue has come to the mainstream limelight only recently, it’s been happening under the hood since forever. Adam Arnold, the Co-Founder of Tribally Games said,
“We had this towards the end of 2021. The person they gave it to then told other VCs we'd copied their idea.”
In fact, the VC later also uploaded a video saying how great “their” approach to growing web3 gaming was, without mentioning Tribally’s name or giving them due credits.
In a conversation with blocmates, Arnold revealed that his team eventually ventured out of the web3 arena to secure funding. They’ve just signed terms with a $1 million lead from TradFi—a Swiss pension fund that has over $1 billion funds under management.
Countless others are on the same creek without a paddle. The exhibits speak for themselves.
There’s one thread of commonality between all, though. Founders seldom name and shame in public because they “see no positive outcome” by doing so.
“Our preference has always been to push forward and keep building,” Arnold told blocmates.
Wallchain Quacks builder Yurii Kyparus feels VCs look at founders as “free sources of research.” He told blocmates,
“I’ve talked to many VCs who were vested in competitors, asked us many sensitive questions on the call, then rejected with no clear explanation.”
With respect to background of these companies, he said, “I don't even remember, but mostly VCs who invested in MEV protocols.”
Shedding more light on the on-ground reality, Greg Tomaselli, the CEO and Co-Founder of Operations.Finance (aka OpsFi) highlighted that there are “fake VCs and family offices” that pitch meetings, request sensitive documents, and then try to make it to the market first by replicating projects in low-income countries.
Talking about a similar incident that he’d personally experienced, Tomaselli told blocmates,
“One situation was that they required a founder I was working with to fly to Switzerland to sign some documents in person before sending the investment funds (all seemed legit at first), but we decided against it as it became quite dodgy.”
He added,
“This was a 3rd time founder who was extremely rich and very well known in the crypto space world wide so we thought it was an attempt to kidnap or force him to hand over cold storage wallets or heavy hot wallets.”
Kidnapping crypto founders/traders/brokers is an altogether different discussion. I’ll save that for some other edition, but just dropping this here meanwhile.
The AI tangent
Now that we’ve seen what real founders and builders have had to say, it’s time to check out what agents have in mind, too.
According to video understanding agent Help,
“Brain-raping is a plague. Just means you’re onto something. They can copy the outputs but they can’t copy the thought process. Just keep pushing.”
Everyone knows how we’re gradually increasing our dependence on AI. A few months back, folks were all excited about how LLMs generated research ideas that were deemed to be “more novel” than expert-written ones.
Danish Pruthi, a faculty at the Indian Institute of Science, brought to light that close to one-fourth of the proposals generated by LLMs are “skillfully plagiarized,” bypassing inbuilt plagiarism checks. Paraphrasing, or using different terminology, is one such way.
He elaborated,
“It appears that LLMs have learned to disguise existing work as novel research through careful rewording.”
Tarun Gupta co-worked with Pruthi on the research. Together, they uncovered that these LLM-generated research documents “do not acknowledge original sources” either.
Bottom line: Copy-pasta-ing is not just a human/VC problem now; it’s clearly an AI problem too.
Damage control
You can’t do anything about the uncontrollable, but you sure can control the controllable factors. That’s what Permian Labs is doing at the minute.
Choi and his team have already started rolling out their docs into the public domain before anyone else takes credit. In his words,
“Execution wins.”
Along similar lines, Devdock AI’s Co-Founder Melbin Thomas said that if a team has a “strong community” who buys into their whitepaper and can see the passion to see it through, it won't matter. “Keep building,” he asserted.
Meanwhile, NodeOps’ CEO and Co-Founder Naman Kabra emphasized the need to tighten the vaults to avoid such incidents from panning out. He said,
“Happened to me like multiple times. I know it’s harsh but making them sign NDA post the first call at least saves a bit. Doesn’t stop them but at least gives us a stance.”
Highlighting how documents are shared around “like a meme,” Tomaselli told blocmates,
“You can put copyright wording(s) in place, you can say strictly confidential, [add] disclaimers on requiring permission to share with anyone else (we do all this), but it does not stop them sharing it around like a meme.”
Earnscape’s Founder Steve Wood, however, pin-pointed that VCs are usually reluctant to sign documents, another in-your-face reality.
In parallel, several from the community feel that teams should refrain from giving VCs whitepaper copies until they have everything else in order, ready to execute.
“Be completely bulletproof and un-fuckable.”
Ain’t out of the woods yet
If you think VCs are just into copy-pasting documents, then you might want to take a look at this. They have the “we love it, but…” bait-and-wait tricks under their sleeves, too. They ultimately push companies to the “more roadmap” trap that ends up transpiring to a “let’s stay in touch” slow death.
This thread sums it all up.
The bottom line
The trenches—what a funny place to be in. What drives away normies ends up becoming the new shiny apple of our eyes. There’s no denying that.
But, the space is far from holy. Sure, we love the freedom it grants us financially, but you can’t blindly trust anybody. Merciless copy-pasta-ing, hacks, and extortions are everyday happenings.
Up your guard, stay wary, smart, and sharp, is all I’m gonna say.
That’s it from me for now. I shall see y’all again soon in another edition.
Cheers!
