Scam? Starscape Capital disappears following ICO
Gone in a flash of money.
Shortly after its ICO, Starscape Capital has vanished from the face of internet, scrubbing away its Twitter account, Medium posts and official website in the kind of disappearing act that's often indicative of a scam.
Starscape Capital claimed to be an arbitrage service, and its prospectus claimed possible returns in excess of 50% a month. Essentially it said it would use investor money to buy a lot of cryptocurrency at low prices on one exchange, then sell it at higher prices on other exchanges.
Starscape claimed it would raise up to 3,000ETH for use in arbitrage trading, and in return give its investors tokens to represent their stake in the project.
The Ethereum wallet address it provided shows that it didn't quite hit the 3,000ETH cap, but still passed 2,000ETH. The bulk of money came from a handful of large deposits. It's not clear whether these were from actual investors or if they were just meant to instil confidence in the project and convince others to put their money into it. Shortly afterwards the wallet was drained with all funds being distributed across a range of other wallets.
From first deposit to last withdrawal the entire process took about three days.
What to consider if it's a scam
If it was a scam, Starscape might have been a little less obvious about it than most. Price differences on exchanges can be considerable, and it's theoretically possible that someone with enough money, and enough luck, could see a 50% per month returns through arbitrage alone.
The prospectus was also fairly thorough, and included a lot of seemingly sensible justifications for its claims. It also came with risk warnings advising people that there was no guarantee of returns and that all investments were "substantially speculative," and took pains to try to address concerns before they were raised. In many ways, Starscape Capital took pains to appear legitimate.
Until recently, Starscape also maintained a visible social media presence, blogging, tweeting and spreading the word publicly.
The main red flags might have been:
- No real need for an ICO or token - The Starscape Capital token didn't seem like it would serve any actual purpose, other than being a token to represent investment in the project. You don't need an ICO or a cryptocurrency to do this.
- A business model that doesn't necessarily need investors - Although it made some attempts at justifying the need for investors, the arguments it made aren't entirely convincing. Arbitrage itself doesn't really need a huge amount of capital, and anyone with enough experience to convincingly achieve the goals laid out in the Starscape prospectus probably doesn't need investors to make a lot of money from it.
It's naturally easier to see red flags in hindsight, but people who did their homework would have found discussion around these issues beforehand as well.
If there are any lessons to be learned, they might be that:
- Cryptocurrency scams aren't always obvious. The days of obvious scams might be ending, and giving way to more subtle schemes.
- It's worth taking the time to make sure you understand what you're buying. This can help you find the inconsistencies that might reveal a scam, or otherwise show that an investment is just plain bad.
- If you really believe in a project, try to poke holes in it and tear it all down. This mindset might go a long way towards helping one overcome the cryptocurrency cognitive biases inherent to everyone.
- Ethereum price: Massive slide as market faces bearish pressure
- Ethereum 2.0: Roadmap, timeline and implications
- Bitcoin falls to US$34,000 as confidence in money markets improves with the Biden inauguration
- Bitcoin price lags while regulators raise fears and banks grapple
- Bitcoin price sees volatility around $37,000 with Pantera Capital projecting $115,000