Doing Business with Unknown People on Web3

Recently a potential client reached out about an investment in a web3 project gone bad. To help inform others of the risk, he asked me to share his experience with my community.

To make a long story short, after about six months of community engagement, the potential client transferred a total of $200K in cryptocurrency into a hybrid IRL and web3 project. Everyone in the project used handles as is often the case in web3. The actual names, contact information and business history of the project founders were unknown to the potential client. 

Once the funds were transferred the project “disappeared.” Links, websites and accounts were deleted. Digital crickets were the only thing he heard.

This potential client is a smart guy. He’s a highly trained professional who admits he let FOMO and his emotions override his normal good judgment.

One of several reasons we were not able to take the case is that it can be very expensive and time consuming to track down unknown parties in web3 transactions. Digital forensic experts are required to ascertain real names and contact information. Finding the bad actors would be an expensive long shot and after losing all this money, the potential client wasn’t in a position to fund the litigation.

We also discussed the fact that even if the client was in the position to hire one of these experts, if the responsible parties are identified, and depending on which state or country they reside or do business in, there are additional challenges of having jurisdiction over the other people or business entities to pursue a claim for fraud and recover damages. In this particular case, and based upon 37 years of experience, we advised the potential client that even if we were able to identify the responsible wrongdoers and secure a judgment against them, when all said and done that judgment might not be worth any more than the paper it’s written on.

The take-a-way he and I want to share with our communities is to always do your due diligence on exactly who you’re doing business with. Always require the full disclosure of identity and contact information of everyone you’re doing business or investing with. Use legal documents with notarized signatures to document all business dealings. If the decisions made by the other side doesn’t allow you to easily do all of this, walk away from the potential nightmare.

Remember, trust but verify.

Mitch

PS- I shared several proven ways to protect yourself from scams and wrongdoers in last November’s issue of my LinkedIn newsletter, “Due Diligence- How to Make Smart Decisions in the Web3 and Digital Asset Spaces.”
https://www.linkedin.com/pulse/due-diligence-how-make-smart-decisions-web3-spaces-jackson-esq-/

Suggest you post on Twitter and break it down to be more digestible 

Thanks. FYI, it's on twitter and already a short post. See https://twitter.com/mitchjackson/status/1686781084925853696?s=20