In the world of bitcoins, investors invest millions without even asking the name of the developer

For months, crypto enthusiasts have poured hundreds of millions of dollars into a project called Wonderland, which claimed to provide an exchange system for the murky world of decentralized finance.

To participate in the project, investors — who called themselves Frog Nation [Nação Sapo]— trusted their money to Wonderland’s treasury manager, a cryptocurrency developer they knew only by the profile name 0xSifu.

In late January, it was revealed that 0xSifu was an alias of Michael Patryn, who had served 18 months in a US federal prison for fraud. The price of the Wonderland token, $TIME, plummeted overnight as panicked inhabitants of Frog Nation discussed project closure.
“I thought, ‘Man, this is going to be ugly,'” said Brad Nickel, a Wonderland Florida investor who runs the “Mission: DeFi” cryptocurrency podcast. “Immediately, it was a total loss of confidence.”

From the beginning, the cryptocurrency industry was built on anonymity. Bitcoin was conceived over a decade ago by a mysterious figure who went by the pseudonym Satoshi Nakamoto. For years, thieves and drug dealers have used cryptocurrencies to do business in the shadows.

The ability to operate anonymously is a core tenet of cryptographic technology. All cryptocurrency transactions are recorded on decentralized accounting systems called blockchains, which allow users to carry out nameless transactions without registering a bank account or interacting with traditional financial regulators.

Today cryptocurrency is becoming an increasingly popular industry, and even the ostensibly legitimate actors — startup founders, engineers and investors — insist on anonymity. A growing number of cryptocurrency entrepreneurs, many of whom control hundreds of millions of dollars in investor funds, conduct business through mysterious internet avatars with no identifying information. Some venture capital firms are supporting founders without knowing their real names.

But the near-collapse of Wonderland [País das Maravilhas] is forcing a reckoning on whether this culture of anonymity undermines accountability and allows for fraud. Last month, BuzzFeed News kicked off a new round of debate by identifying two of the pseudonymous founders of the Bored Ape Yacht Club, a $2.5 billion collection of non-fungible tokens, the digital collectibles known as NFTs.

“This pseudonym business is very dangerous,” said Brian Nguyen, a cryptocurrency entrepreneur who used a pseudonym last year before disclosing his identity. “They can be good actors today, but they can be bad in two or three years.”

Nguyen has already lost over $400,000 in a common crypto scam called pulling the rug, in which an anonymous developer launches a project, solicits funds from investors, and then disappears with the money. Rug pulling victims are often left with little recourse against anonymous thieves.

Still, some of the most powerful companies in the industry have admitted that crypto engineers and startup founders often prefer to operate anonymously. “Cryptoevangelists” argue that this creates a more egalitarian market, in which entrepreneurs are judged on their technical expertise rather than their academic or family backgrounds. Blockchain provides a public record of transactions, allowing experienced observers to assess an anonymous entrepreneur’s qualifications without consulting a resume.

Amy Wu, who leads the risk arm of cryptocurrency exchange FTX, said she sometimes collaborated with anonymous investors she met online. One of them gained fame with a Twitter account parodying Elon Musk, who now has nearly 2 million followers.

“I don’t know who he is. I don’t know what company he worked for,” Wu said. “And I don’t need to. I know he’s an expert in the industry.”

Last year, FTX recruited an influencer under the alias SolanaLegend on Twitter to advise corporate clients interested in NFTs. An FTX employee introduced The New York Times to SolanaLegend, who in an interview declined to provide his real name, saying he remains anonymous to protect his safety and privacy. Although he disclosed his true identity during an initial call with his supervisors at FTX, he said, his company’s email address features his pseudonym, which he chose as a joke.

At work, he makes an exception to secrecy. On customer calls, he often uses his real first name to introduce himself, worried that traditional business executives might feel uncomfortable working with someone known simply as “Legend.” [Lenda].

In the last year, venture capital firm Paradigm has also hired engineers and researchers who operate anonymously; they appear on the company’s employees page under pseudonyms. The most recent hire was a cryptographic engineer who goes by Transmissions11 and attends high school “on his own time,” according to the company bio. (Jim Prosser, a spokesman for Paradigm, said that employee bosses knew their identities.)

In interviews, anonymous cryptocurrency entrepreneurs and engineers offered various reasons to hide their names. Some feared that a regulatory crackdown could put them in the crosshairs of justice. Others said they didn’t like the attention or feared that their growing wealth could make them targets for thieves and hackers.

Anonymous entrepreneurs often go to extreme lengths to keep their identities private, using voice-altering software on calls or requiring business partners to sign confidentiality agreements.

Some venture companies are willing to invest in them anyway. Last year, 0xMaki, a developer who helped run the prominent cryptocurrency project SushiSwap, raised $60 million from a group of venture capitalists, including Wu, without revealing his real name to them. (The deal fell through after members of SushiSwap — the so-called decentralized autonomous organization, or DAO, in which individual investors have significant influence — raised concerns about funding.)

Last summer, the anonymous founder of Alchemix, another major cryptocurrency project, raised $4.9 million from a group of venture companies led by CMS Holdings. Dan Matuszewski, founder of CMS, said he never asked the project leader, who uses the alias Scoopy Trooples, to reveal his identity.

“A lot of these guys have multi-year reputations,” Matuszewski said. “It doesn’t seem to make much sense for them to run off and steal the funds.”

For many people, however, it can be difficult to assess the credentials of an unknown developer operating under a pseudonym. The anonymous founders of a cryptocurrency collective called AnubisDAO raised nearly $60 million in just a few hours last year; less than a day later, the funds disappeared in the second biggest rug pull of 2021, according to blockchain tracking firm Chainalysis.

“No one is auditing,” said Jordi Alexander, chief investment officer at cryptocurrency trading firm Selini Capital. “You have anonymous people on the internet now. Sometimes they turn out to be scammers.”

Currently, cryptocurrency entrepreneurs using their real names sometimes advertise their startups as “fully doxxed”, meaning their background is public. And founders are finding it harder to keep their identities a secret. BuzzFeed analyzed publicly available business records to establish the identities of Bored Apes founders Greg Solano and Wylie Aronow. (None responded to requests for comment.)

Wonderland was established in September by Daniele Sestagalli, a cryptocurrency entrepreneur who managed the project with Patryn, using imagery from “Alice in Wonderland” to attract investors. In a blog post in January, Sestagalli said he had known since December that Patryn was a former fraudster, but decided not to act because he believed in “second chances”. (Sestagalli did not respond to requests for comment.)

His investors were not so forgiving. Like SushiSwap, Wonderland runs as a DAO. After a vote in January, Patryn was forced to resign from the project. (He did not respond to emails.) A second referendum calling for the closure of “Wonderland” was narrowly defeated.

Patryn’s identity might have remained a secret were it not for the work of an influential cryptocurrency detective, who tweeted screenshots of a text conversation he had with Sestagalli. In these messages, the founder of Wonderland seemed to recognize the real name of 0xSifu.

Last month, the detective was once again tweeting evidence that an anonymous leader of another cryptocurrency project had already been fined by the Securities and Exchange Commission.
The detective’s name? Unknown. He uses a pseudonym.

Translated by Luiz Roberto M. Gonçalves