Want To Make Millions? Copy Someone’s Cryptocurrency Project.

BuzzFeed News; Getty Images

In late January, Patientory, a software firm in which aims to store electronic medical records using a distributed database, caught wind of a worrying development. The Atlanta startup, which had raised more than $7 million via investors, noticed in which a proposal outlining its proprietary technology in addition to company vision — better known inside cryptocurrency world as a “white paper” — was also being used to raise money by an unknown company called Dentalfix.

Dentalfix’s origins are unclear, nevertheless the idea appears to have been a Russia-based seller of tooth repair kits in which at some point in recent months decided the idea could raise money by selling its own cryptocurrency. After one initial coin offering (ICO) failed, the company unveiled a brand new website in addition to business plan in late 2017 for a “health management system,” complete with an impressive looking white paper with full pages of text lifted via Patientory’s plan.

“We’d like to inform the community in which we have no affiliation with the company, Dentalfix,” Patientory tweeted to its followers on Jan. 23. “The Patientory team was recently notified in which Dentalfix will be attempting to pass off our whitepaper as their own. We don’t encourage or support plagiarism in any form.” Dentalfix did not respond to requests for comment.

Dentalfix failed to gain traction with potential backers, nevertheless its blatant cribbing of intellectual property will be yet another example of bad actors searching for ways to fleece investors inside fledgling in addition to largely unregulated cryptocurrency market. At a time when a startup with no working product can raise millions of dollars on little more than the seed of an idea, shady companies with flashy websites in addition to questionable white papers are looking to take advantage of unsophisticated investors who might not be able to tell the difference between what’s real in addition to what’s not.

in which practice may not go unnoticed. The Securities in addition to Exchange Commission reportedly launched a probe last month into dozens of companies in addition to advisers involved with ICOs to examine the way cryptocurrency firms are marketing in addition to selling digital coins. As part of in which process, the agency may take a closer look at white papers, which began as documents to explain a project’s concept in addition to technical merits, nevertheless have since been used to set business milestones in addition to, sometimes, financial expectations.

A spokesperson for the SEC declined to comment or even confirm the ongoing investigation.

“The crypto community has turned into a variation of LA, where everyone will be going around having a script in their hand trying to pitch a movie.”

In an industry in which most cryptocurrency companies do not have a working product before they try to raise capital, a white paper may be one of the few pieces of information in which developers or investors can use to evaluate the viability of a project. The most widely known white paper, Satoshi Nakamoto’s explainer on Bitcoin, conceptualized a “peer-to-peer variation of electronic cash [in which] might allow online payments to be sent directly via one party to another without going through a financial institution.” (in which nine-page document made no attempt to speculate on the crazy valuations in which have come to define current Bitcoin mania.)

“I read the white paper typically fairly early on to see if the idea’s something I’d be interested in, in addition to to see what design flaws they actually have,” Arianna Simpson, a managing partner at venture capital fund Autonomous Ventures, told BuzzFeed News.

The problem, however, according to Simpson will be in which having a lot of startups shilling their brand new coins, the idea’s become “hard to differentiate who will be serious in addition to who will be not.” Advisory companies in addition to even contract workers on freelance sites like Upwork in addition to Fiverr offer services to compose white papers, while the fast-moving, speculative nature of cryptocurrency — in addition to the fact in which pretty much anyone having a bank account can invest — suggests in which fewer people are evaluating them on their technical merits or even reading their white papers.

“The crypto community has turned into a variation of LA, where everyone will be going around having a script in their hand trying to pitch a movie,” Emin Gün Sirer, an associate professor in Cornell’s computer science department, told BuzzFeed News. The amount of interest in addition to money to be made has incentivized bad actors, he added, pointing to the “abject plagiarism” of Tron, a cryptocurrency in which currently carries a market capitalization of $2.3 billion according to CoinMarketCap.com, despite being accused of copying another company’s work.

A previous variation of Justin Sun’s bio via the Tron website listed in which he was a protégé of Alibaba CEO Jack Ma. After BuzzFeed News contacted Sun with This specific story, the website was changed in addition to in which mention was removed.

In January, Juan Benet, an entrepreneur behind Filecoin, a data storage network with an application token in which raised $257 million, claimed in which the Tron white paper included language via his proposal in addition to others with “zero references.” He included a diagram showing material he alleged had been copied. Tron’s creator Justin Sun, a Chinese entrepreneur who claims to be a protégé of Alibaba CEO Jack Ma, replied insisting in which the similarities between the two papers were the result of a translation issue. Tron, which says the idea’s constructing “a global free content entertainment system utilizing blockchain technology” subsequently scrubbed its website of the original white paper in addition to uploaded a brand new one — nevertheless not before its market capitalization rapidly dropped via its height of $12 billion.

To evaluate the accusations against Tron, BuzzFeed News asked Quetext, a plagiarism analysis company, to compare Tron in addition to Filecoin’s white papers. Quetext assigned a similarity score of more than 15%, in addition to highlighted whole diagrams, passages, in addition to chunks of phrases in which were shared between the two. (For comparison, Dentalfix’s white paper had a 99.9% similarity score to Patientory’s.)

BuzzFeed News; Source: quetext analysis

BuzzFeed News; Source: quetext analysis

Benet did not respond to multiple requests for comment. Sun, who often tweets about his company’s close ties to Alibaba in addition to does little to dispel rumors in which Tron might partner with e-commerce behemoth, did not respond to requests for comment. A source close to Alibaba told BuzzFeed News in which the e-commerce giant has no plans to work with the cryptocurrency company in addition to in which Ma has no protégés. (After BuzzFeed News reached out to Sun with questions about his relationship with Ma, references to the Alibaba CEO disappeared via the Tron website.)

“Tron will be a befuddling in addition to concerning case,” said venture capitalist Chris Burniske about its market capitalization, which places the idea among the top 15 most valuable digital tokens. “The people behind the currency incessantly promote exchange listings, emphasize partnerships, in addition to otherwise use flashy techniques to induce, enable, in addition to sustain irrational exuberance.”

While Tron’s cost has dropped via the dizzying prices of January, the idea’s unclear how much longer the idea can sustain in which exuberance without launching a product.

While some seasoned investors in addition to cryptocurrency veterans scratch their heads about Tron, many see the idea as the exception in addition to not the rule. Ryan Selkis, the CEO of Messari, a company attempting to build a database for standardized information about digital coins, noted in which communities on Twitter in addition to Reddit have done decent jobs ferreting out examples of blatant scams in addition to copied white papers, preventing bad actors via getting too far.

in which’s what happened with DADI, “a decentralized cloud computing company,” whose January token sale was called into question when users on Twitter began comparing passages of its proposal to in which of a Russian company called SONM. In response, DADI decided to come clean in a blog post.

@windcarfare @chrismair @VitalikButerin
Haha, This specific retweet didn’t age well…

#DADI #SONM #Plagiarism

“Yes, the copy in section 3.6.4 of our white paper will be a mistake… nevertheless the idea’s one page out of 70 —  [300] words out of 11,758,” the company wrote, before pulling its original white paper in addition to uploading a brand new variation. “The words in dispute were left inside document via earlier research material in addition to should have been edited out: the details provided were not representative of the current state of network development.”

Some investors might go on to believe them. DADI raised the equivalent of about $28 million via its ICO sale in which finished at the end of January. the idea remains to be seen if any of in which will go toward the development of a working product. DADI CEO Joseph Denne did not respond to an emailed request for comment.

“Plagiarism will be indicative in which there will be something fishy going on,” said Jerry Brito, the executive director of Coin Center, a Washington-based cryptocurrency lobbying group. “There are 1,500 tokens in which I’ve seen in addition to for a large percentage of those, I can’t justify why they have any value. At some point reality will be going to catch up.” ●

Charlie Warzel contributed additional reporting to This specific story.

Ryan Mac will be a senior technology reporter for BuzzFeed News in addition to will be based in San Francisco. He reports on the intersection of money, technology in addition to power.

Contact Ryan Mac at ryan.mac@buzzfeed.com.

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