Finally got to finishing part 4 of the Vagina Club Blog. This one is nice and juicy with lots of name calling, screenshots and all the things people love in crypto. Lets get into it!
In this episode, we will highlight some of the scummiest VCs in Crypto and break down their bad behavior. If you haven’t read the previous episodes make sure you check those out as well, preferably before reading this one.
Table of Contents
From 0 to Gold to Shit and all in 2 years
FBG the Fintech Blockchain Group and quickly became one of the most controversial crypto management funds of Asia. FBG’s fame stems from turning $20 million into $200 million in less than a year.
It was founded in early 2017 by FBG founder Shuoji Zhou, 36. Shuoji is a special guy, he studied applied math at the University of Electronic Science & Technology but never cared a lot for maths. In an interview with Forbes he said, “Friendship, I think, is the most important thing in college. I forgot all the things I studied,”.
Pretty big statement especially since cryptography is a sub study of mathematics
Shuoij started making his fortune with arbitrage trading in the early days of crypto. One of Zhou’s tricks was to make use of the inefficiencies and problems in the cryptocurrency ecosystem. He could often buy bitcoin on one exchange at $300 and sell it on another at, say, $301.50, pocketing a riskless $1.50 per coin. As time went on Shuoji perfected his skills to abuse the system and leech off the inherent problems of this nascent market.
In early 2017 before the start of the ICO frenzy, Zhou and a few of his Chinese buddies from university joined together and raised around $20 million USD. They started to invest in promising projects like OmiseGo, Tron and MakerDao.
Lets take a deeper look at their investment portfolio.
You can find the entire list of their investments in the link above.
The average total return on Investment on all projects currently is around -63% at time of publishing this blog, however, FBG has 80% of investment projects – below the ICO price in dollars, the average is much higher thanks to Zilllqa.
FBG Capital Investment Strategies
In part 2 of this series, we explained what the goals are for a traditional Venture capital firm. At the end of 2017 and early 2018 investing in ICOs was not about finding good projects, it was about getting into them and generating the hype around them. Name of the game, find a good project with the help of engineers and specialists to examine the technology look at good teams and then hyping the shit out of them. Most crypto funds did not care about long-term visions of a project because they can make quick easy money dumping and clueless retail investors. This is one of the main problems in crypto hyper liquidity.
One could almost compare it with the boy band boom of the 90s. Find pretty boys, that can sing (at least dont sound horrible). Now generate crazy hype and cash out.
In part 2 of this series, we explained the importance of price in ICO Investing. Receiving discounts and getting into hot projects was the difficult part. FBG became exceedingly good at getting into projects and also with massive discounts. They talk about valuation added services that they can provide and a bunch of other lies that usually later fall flat out.
At this point it be probably better to just give away the tokens for free
- They provide exchange “intros.” Totally unneeded in late 2018. The industry is small. I can walk up to CZ at a conference and pitch my project.” If you have a halfway decent token and volume, all the tier2 exchanges will list you for next to nothing and there are 100 ways to start the application for tier1 exchanges who will judge you according to their own criteria.
2. A three letter China Fund got a great reputation as the fund to follow in ICO 1.0 because they weren’t just investing — they were actually making sure that projects did well, by doing the marketing in-house and managing the Asia retail hype. So for a time it was a good party if you heard they were on a project. This was fun while it lasted and eventually fell apart and their reputation petered out.
3. FBG offers the FBG One market Making Digital. As FBG is a big trader and runs a lot of volume on some of the main exchanges in crypto they offer their services for market making. The idea is simple, you tell a project you will secure a stable secondary market by providing millions in trading volume via their market makers and in return, you need to get 100% unlocked tokens with a very high discount. They will then use those tokens lock them up in the algorithmic trading bots and provide fake volume, buy and sell orders on the exchanges.
4. Having such terms makes it easy to make quick money by simply dumping all those tokens on other retail investors or other funds. A perfect example of this behavior was the Uchain ICO. Currently sitting at almost 100% loss UChain was once a very hyped project with lots of potential great team and advisers. Now it’s a completely REKT ICO. UChain was told that FBG will provide maker making and professional exchange listing on one of the top exchanges in the world. The listing was a complete mess and ended up on Hotbit and and Bilaxy. The market making never started. Instead, FBG made quick returns and moved on to the next projects.
CEO Shuoji Zhou
Mid this year Forbes published an article on FBG capital, in which they highlight all the aspects of “Asias Hottest Crypto Fund”. Once Shuoji Zho saw the headling he quickly shared this article with all his friends and community groups on social media without even reading it. The article highlights FBGs dubious strategies and also highlights several negative aspects like:
Why did FBG buy into Tron? “We thought he was a very good marketer,” says FBG partner Richard Liu of Tron CEO Justin Sun. Sun’s 450,000-follower Twitter feed is filled with promotional messages, like a recent tweet featuring Tron’s logo on Times Square’s Nasdaq Jumbotron with the caption “#TRON hits #NASDAQ once again! We’re going to change blockchain, the internet, and the world! We’re going full speed. Don’t get left behind.” Sun has hyped Tron to a $18.9 billion peak market value, despite no meaningful revenues. (FBG claims it has given back its Tron investment.)
FBG also has a reputation for getting in and out of investments quickly. “They’re flippers,” says Yubo Ruan, founder of Palo Alto-based 8 Decimal Capital, a rival crypto hedge fund. “Their reputation is pump and dump.”
All in all, the article shines a very negative light on the team. Sharing this piece among other funds and ICOs was one of many problems FBG ran into in the past few months.
Reselling allocations breaking contracts
FBG obtained a reputation of getting discounts and selling them at a premium at higher rates to other funds, VCs and Pools. This behavior became very popular in 2018. Get allocations to sell them for more than what you had to pay, make quick risk free money. Sounds too good to be true?
Thats because it is. A SAFT (Simple agreement on future Tokens) is a big pile of shit in terms of legal standpoint they barely have anything written in there, but one thing that they do clarify is that buying tokens for the explicit reason to sell them again to 3rd parties can lead to termination of the contract.
Aergo proudly presents the FBG Capital logo on their homepage. However just this month they were rumored to be complianing about FBG Capital to be selling their allocation on the OTC market.
We know because we were offered a FBG Allocation from 3 different sources. A week later aergo announced to the public that they will increase the amount of locked tokens.
We know most broker-dealers in the space and often FBG Captial is the ones that are selling their tokens. The main problem with this system is that these VCs have direct contact with the team and are selling their allocation to the public as soon as bad news comes in. Essentially its insider trading on the OTC markets. It also causes a dilution of interest as the secondary markets buy the tokens over the counter, leaving the exchanges dry and open to easy price manipulation.
General cluelessness of Token economics and decentralized systems
We talked to several ICOs that were in contact with FBG Capital and other Venture Capitals in general. FBG Capital uses external academics, scientists and engineers to evaluate the technology of their projects if there the project even have anything to evaluate. In direct conversation, most of the teams of such funds show little to no understanding of token economics, decentralized systems, and distributed ledger technologies. To provide long term value, VCs need to have anything of value that they can offer. This is hard work, building new valuation models for cryptocurrencies and building real value is much harder than deceiving and using dubious tactics to generate revenue. In fact, over 50% of their income comes from marginal and day trading.
Frankly there was no financial incentive to have any such understanding in the first place. It was extremely easy to make money by hustling. Hustling is their only ability.
Funds are dried up, they pushed all their remaining liquid assets into various Shitcoin project early and mid this year. With no retail to dump on it on or founding teams who were in it for the pump and not the long term technology. These investments never went liquid, most of them destroyed the market and got REKT anyway. We heard from various sources that many of the biggest Crypto Funds are struggling to survive. Many are faced with the problem that the ICO Teams do not want to list on exchanges, but the funds desperately need the liquidity to pay their employees.
The result is an over flooded OTC market with ICO tokens selling at seed prices.
Looking hashgraph 100% unlocked for 3.5 cents, or Oasis Labs for seed price? Its all popping up in the OTC telegram channels.
Others like Multicoin Capita land Polychain Capital, some of the best funds in the world have also reported losses. Galaxy Digital LP, a fund owned by Mike Novogratz has reported losses of over $175 million. Also, a total of nine funds including Alpha Protocol and Crowd Crypto Fund have decided to close down. Kyle Samani, the Cofounder of Multicoin Capital, says that new capital has slowed for even high profile funds theirs.
Right now, the market has no compass. Things that worked in the past are not working — the reason being is that they worked not because of the genius of the strategy, but because retail investors had FOMO’ed in and were taking the dump. Smart forward-looking players will recognize this.
You can fool some people sometimes, but you can’t fool all the people all the time
Strategies that the Asian VC cartel and Chinese ICOs used to generate Fomo among Western retailers:
Top Ranking on So-and-So’s Spreadsheet
5 China funds’ logos on the website
Random PHD with 8 years of blockchain experience on the team
They have signed a partnership agreement with <Insert big company name> (reality is they usually have a buddy that owns a local franchise)
They have a 50-million user base from another company they are bringing over to use their payment token. (Stuff like this is usually debunked with any amount of real diligence — except if you are MachineZone and doing your own Reverse ICO.)
And recently they started a new tactic, opening on secondary exchanges with 0.5% circulating supply and then going on top exchanges. Just to then generate last bit of fomo to dump on. This behavior is really disgusting.
We are at a point where everybody understands that things can’t go on like this. Most people are screaming for regulations and are hailing the STO, without having any understanding of securities laws and their implementations. A few other people believe that common sense is the way to go. Self-regulations and more responsibility.
The ICO Venture Cartel as we know it is running out of fuel. Their deceiving tactics are not fooling anybody anymore. If you want to know who is going to win look to the project that regular people are talking about. The ones that people can maybe invest 1 ETH into a project are worth getting excited about. The ones that show us cases that bridge over to the “real world” outside of blockchain. Those that show understanding for token economics and decentralized networks. CEO’s that talk about the inherent problems with centralized solutions in every industry in the world. People that are actually passionate about decentralized ledger technologies and spend day and night working to make this our future.
In the last episode of this series we’ll highlight all the aspects investors should watch out for, to avoid getting dumped on by Crypto funds and what ICOs should watch out for when approved by such 3 letter Asian Crypto funds. Please share this and other related articles to ICO communities to help us finally get rid of the players that are parasitically leaching off the system and adding no value at all.
If you liked this article please make sure to check out the episodes 1 – 4 here.
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