The cryptosphere has become almost synonymous with anonymity. Both retail investors and venture capital firms invest in projects without even knowing the name of the founders. Why this happens and why it is dangerous: in The New York Times recount.

Over the course of several months, cryptocurrency enthusiasts have poured hundreds of millions of dollars into a project called Wonderland, which aims to provide an exchange system for decentralized finance. To participate in the project, the investors, who called themselves Frog Nation, entrusted their money to the manager of Wonderland, a cryptocurrency developer they knew only by the pseudonym 0xSifu.

In late January, it was revealed that 0xSifu is the pseudonym of Michael Patrin, who served 18 months in a US federal prison for fraud. Wonderland's $TIME token price instantly collapsed as frightened Frog Nation residents discussed shutting down the project. Brad Nickel, one of the Wonderland investors and author of the Mission: DeFi podcast, recalls: "It immediately led to a complete loss of confidence."

Since its inception, the crypto industry has been based on anonymity. Bitcoin was minted more than a decade ago by a mysterious figure known as Satoshi Nakamoto. For years, cryptocurrencies have been used to run shady businesses.

The ability to work anonymously is a fundamental principle of crypto technologies. All cryptocurrency transactions are recorded on blockchains, decentralized accounting systems that allow users to transact nameless, without registering a bank account or interacting with traditional financial controllers.

Some venture capital firms support founders without even knowing their real names.

But the plight of the Wonderland project raises questions about whether this culture of anonymity undermines accountability and encourages fraud. BuzzFeed News sparked a heated discussion last month by identifying two pseudonymous founders of the Bored Ape Yacht Club, a $2.5 billion NFT collection.

Brian Nguyen, a crypto entrepreneur who used a pseudonym last year before revealing his identity, points out the dangers of the pseudonym. Even though he is now a law-abiding person, maybe in two or three years he won't be.

Nguyen once lost more than $400,000 in a widespread scam in which an anonymous developer launches a project, raises funds from investors, and then disappears with the money. Victims are often left virtually defenseless.

However, some of the industry's most influential players acknowledge that developers and founders often choose to work anonymously. This provides a more level playing field: entrepreneurs are judged on their technical background, not their academic or family background. The public registry of transactions on the blockchain allows experienced observers to assess the qualifications of an anonymous entrepreneur without looking at a resume.

Amy Wu, who runs the venture capital arm of cryptocurrency exchange FTX, says she has occasionally teamed up with anonymous investors she met online. One of them rose to fame by launching an Elon Musk parody Twitter account, which now has almost 2 million followers.

I do not know who is he. I don't know what company he worked for. And I don't need it. I know he is an expert in this industry,” admits Amy Wu.

Last year, FTX hired Twitter influencer SolanaLegend to advise corporate clients interested in NFTs. In an interview with The New York Times, SolanaLegend declined to give her real name, saying she remains anonymous to protect her safety and privacy.

At the same time, during her first conversation with her management at FTX, she revealed her name. She also calls him when she introduces herself to clients, believing that traditional business executives may be uncomfortable referring to him by a pseudonym.

Over the past year, venture capital firm Paradigm has also hired developers and researchers who work anonymously. Their aliases are listed on the company's staff page. The latest stuntman hired is known as Transmissions11 and attends high school "in his spare time," according to his biography on the site. Paradigm spokesman Jim Prosser points out that the employees' managers know their real names.

During interviews, anonymous crypto entrepreneurs and developers offered many reasons to hide their names. Some feared that, due to legislative restrictions, they might come under the attention of law enforcement agencies. Others said they didn't like the attention or worried their growing wealth might make them targets for thieves and hackers.

Unidentified businessmen often go to great lengths to keep their identities private, using voice changer software on calls or requiring business partners to sign non-disclosure agreements.

Some venture capital firms are willing to invest in them anyway.

Last year, 0xmaki, the developer who helped launch the famous crypto project SushiSwap, raised $60 million from a group of venture capitalists, including Amy Wu, without revealing her real name to them. The deal fell through after members of SushiSwap, the so-called Decentralized Autonomous Organization (DAO), raised concerns about funding.

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

“Many of them have long-standing reputations. It doesn't seem like it makes sense for them to run away and hide with the money," said Dan Matuszewski, founder of CMS Holdings.

But for many, it can be difficult to assess how trustworthy an unknown developer working under a pseudonym is. Last year, the anonymous founders of a crypto community called AnubisDAO raised nearly $60 million in just a few hours. In less than a day, the funds were gone. This was the second largest carpet pull in 2021 according to Chainalysis.

“At the end of the day, nobody audits. Now they are just anonymous people on the internet. Sometimes they turn out to be scammers,” says Jordi Alexander, chief investment officer at Selini Capital.

These days, crypto entrepreneurs using their real names are even highlighting their past hype as a startup promotional benefit. And it's getting harder and harder for founders to keep their identities secret: The founders of the Bored Ape Yacht Club, for example, were discovered after examining publicly available business records.

The Wonderland project was founded in September by Daniele Sestagalli, a crypto entrepreneur who led the project together with Michael Patrin. In January, Sestagalli wrote on his blog that he had known about his partner's criminal record since December, but decided not to take any action because he believed in a "second chance."

His investors were not so forgiving. Like SushiSwap, Wonderland runs as DAO. After voting in January, Patrin was forced to withdraw from the project. A second referendum calling for the closure of Wonderland was defeated.

Patrin's identity might have remained secret were it not for the work of an influential crypto researcher who posted screenshots of correspondence with Sestagalli on Twitter. In these messages, the founder of Wonderland seems to have admitted that he is hiding from his real name 0xSifu.

Last month, the detective picked up the case, posting evidence on Twitter that an anonymous leader of another crypto project had once been fined by the US Securities and Exchange Commission.

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