An investigation into certain crypto launchpads and projects raising funds on them suggests what appears to be systematic misrepresentation and lack of transparency in fundraising practices, potentially misleading countless investors. This report details the inquiry into the operations of these launchpads and the projects raising funds on them.
The investigation began with an anomaly too striking to ignore; project after project on certain crypto launchpads were achieving 100% funding, even for substantial amounts exceeding $200,000. This perfect score phenomenon raised red flags and prompted a deeper dive into the workings behind these seemingly flawless fundraising rounds.
At the heart of this fundraising scheme lies a little-advertised refund policy. Projects listed on these launchpads offer investors the option to claim full or partial refunds of their investments after the project's token is listed on an exchange. While ostensibly a protection for investors, our investigation suggests these policies are being exploited to create a false impression of fundraising success. Projects can claim high funding amounts knowing that a significant portion could be refunded. This inflates perceived demand and success, potentially attracting more investors based on false premises.
The modus operandi (MO) appears to be designed to mislead investors, particularly the investors buying tokens on exchange on listing after the launchpad fundraising phase. Here's how the scheme operates:
Selective Launchpad Choice: Project teams select launchpads with refund policies, allowing them to inflate fundraising totals without actually securing the funds.
Hype Machine: Run social media campaigns to create a narrative of overwhelming demand and fundraising success, conveniently omitting any mention of refund policies.
Artificial Scarcity: Fundraising events are strategically scheduled in rapid succession across multiple launchpads, creating a false sense of urgency and scarcity.
Perception Manipulation: Inflated fundraising claims manipulate investor perception, making projects appear more successful and in-demand than they truly are.
The Exchange Gambit: List token on exchange, giving project teams and early investors the opportunity to sell tokens at potentially inflated prices, profiting from the artificially created demand.
Perhaps most troubling is the lack of transparency permeating the entire fundraising process. Neither the launchpads nor the projects disclose ‘Token Sale’ contract addresses or post-raise fund transfer transaction hashes. This opacity makes it nearly impossible for potential investors to independently verify fundraising claims. It exploits the information asymmetry between project insiders and regular investors, making it impossible for the latter to perform due diligence. This allows marketing claims to go unchallenged and perpetuates the cycle of misinformation and potential fraud.
To verify the claimed raise vs actual raise, we focused on Kommunitas launchpad and the projects raising funds on it. We selected Kommunitas, as the projects on it claimed to raise significant funds. However, our analysis of blockchain data and smart contracts reveals alarming discrepancies between claimed fundraising amounts and actual funds received by projects. The table below illustrates this for a few of the projects who raised funds on Kommunitas :
By reporting inflated fundraising figures, projects can create a false sense of success and demand. This misrepresentation can lead to increased investor interest and potentially higher token prices upon listing on exchange, fueled via social media. The actual, much lower raise amounts are hidden, deceiving investors about the project's true financial backing and market interest.