Investors Burned again by Pinksale Finance
Only Invest in Professionally KYC Verified Projects
Only Launch with Your Project Team Professionally KYC Verified
PinkSale recently announced that one of its KYC’d Clients, JIYU Network, had “purposely deceived their investors and stole funds from the liquidity”. This case highlights clear deficiencies in the PinkSale KYC process, as well as, their non-existent support process for the injured community members. If a KYC provider doesn’t utilize a high integrity process to truly verify & match the candidate’s Identification to their aliases, and if fraud does occur, doesn’t help drive accountability or enable fund recovery, what is its value? Let’s take a closer look at this PinkSale breach, what they disclosed, how the fraud occurred, and how a professional KYC verification might have deterred the fraud or supported pursuit of the responsible parties.
Pinksale is a token launchpad with support for all the major chains including Ethereum, BSC, Polygon, Avalanche, Fantom, Cronos, and Dogechain. With the majority of its projects launching on Binance Smart Chain (BSC), it has gained a lot of traction in the past year and continues to build upon its network. Scams have been a consistent issue on the Pinksale platform.
PinkSale integrated optional KYC into their project Launchpad which has gained the trust of Pinksale project investors. Unfortunately, this trust is misplaced, and the JIYU incident has highlighted their significant KYC process deficiencies and exposed how PinkSale platform projects can scam without the fear of negative consequences.
A Chronicle of Events
Nov 5, 2022: JIYU is welcomed by Pinksale on its ecosystem of launchpad:
Nov 17, 2022: The following PinkSale Announcement was broadcasted through Telegram including the Media Files (1 Video and 3 Pictures):
“Dear PinkSale customers,
Following an extensive investigation into the events following the presale and launch of the project called JIYU NETWORK, we have reached the conclusion that the people behind it purposely deceived their investors and stole funds from the liquidity.
We have attempted in any possible way to contact the owner and developer, to no avail. Hence we have no other choice but to make their identification documents public so that anyone affected by this event has names to pursue legally if so chosen.
We take the safety of PinkSale users very seriously and will not shy away from publishing the personal information of those who use our platform to be involved in illegal activities.
A Reminder of Key Elements of a Professional KYC Verification:
– Verification of the Government issued IDs of the Founder/(s)
– Verification of the Identity of the Founder/(s)
– Live Video Call Verification to check for any Deepfakes
– Live Interview of the Founder/(s) about the Project and their Project Roles
– Attestment of Legal Project Accountability on Video as well as Written Affidavit by the Founder/(s)
– Highly secure encrypted Storage of all the Personal Data of the Founder/(s) including IDs, Video, and process documentation
Also as part of the Verification, if Fraud is committed by KYC Verified Clients:
– Professionally collecting information from the injured community members, and helping those community members file reports with the appropriate law enforcement agencies
– Preparing a Legal Case Report with all the pieces of evidence after completing deep forensic analysis on the fraud committed, the parties involved and the movement of illicit funds
– Reporting to the Legal Authorities through the appropriate channel about the Fraud / Scam
– Releasing the Personal Identities only to Government or Legal authorities that request the Information through a Court Order made in name of the KYC Provider
– Assisting Legal authorities in pursuing the case through the provision of any other information withheld by the KYC Provider
Understanding the key elements of a Professional KYC Provider, allows one to easily see what’s wrong with PinkSale KYC process, why it lacks credibility, and why publicly releasing the confidential KYC information of the alleged founders is unethical and useless for the injured parties.
Let’s Explore Further – PinkSale Critical KYC Process Failures
The KYC candidate is recording the video while sitting in a car, and it clearly appears to be a recorded video rather than a live call.
A Live Call allows the KYC interviewer to fully assess the candidate, their project knowledge, their stated project role, their current location, and more. A Live Call prohibits supporting a “front man” with answers to key questions.
The candidate video was poorly reviewed or not reviewed at all by a qualified KYC interviewer. In the KYC video, Patrick Baker, the alleged Frontman, claims to be the founder and is accepting legal responsibility for the project. He clearly has no clue about the KYC process, the project he is verifying, and what Pinksale is (pronouncing it as Pinkscale). A qualified interviewer would have easily identified as a frontman/actor hired by JIYU Network, and the KYC Verification would have been denied
“Frontman” groups are becoming more prominent and are collecting fees to KYC on behalf of a project which intends to defraud investors. Unfortunately, most KYC suppliers are not investing the time and money to properly KYC verify, allowing “Frontman” groups to support investor fraud.
A proper KYC Verification is complex. It requires the use of the latest technologies, a highly trained & qualified team, excellent process controls, and many layers and angles of verification. Very few KYC providers offer a proper and professional KYC verification service. Most are similar to PinkSale, are “checking the box” and collecting profits for little or no value added for the investor.
Publicly posting anyone’s confidential ID information is unethical and useless. PinkSale, nor any KYC Verification provider, does not have all proper resources required to determine if fraud occurred. Further, in this case, posting the “Frontman” ID does nothing to help investors.
Legitimate Project Owners need confidence their identities will remain secure and confidential, and will only be released by the KYC provider when legally compelled to Government organization investigating a cyber crime or fraud. They have no interest in having organizations that have weak KYC verifications processes, making a unilateral decision to release their highly confidential information.
Further, publically doxxing a scammer does nothing for the investors. Few, if any, have the means to complete a proper investigation or the knowledge of where and how to file a legal complaint. They also have no relationships with Central Exchanges to freeze funds, the most likely way funds can ever be recovered
PinkSales’s postings and claims of a job well done provide 0% chance of any investors recovering their funds and 0% chance of the criminals actually being brought in a court of law.
The Professional KYC Verification Process by Assure Defi is Clearly Differentiated from Others
The Assure DeFi verification process is extensive and verifies Government issued identifications with the latest technologies. It combines that with further checks of their actual identity, location, ownership of aliases, project details, and project roles during a detailed LIVE Video interview by a highly trained, 3rd party verified, interviewer. Assure DeFi also requires candidates to take legal responsibility for the project and project key roles, and attest to follow the laws of their jurisdiction and international legal authorities.
Assure DeFi would not have verified the JIYU network “frontman” and this project would have been posted on the Assure DeFi Website, to warn investors and other KYC providers about the potential for fraud with the JIYU project. In this case that would have avoided pain and losses for tens of thousands of community members.
Fraud Investigation and Reporting is also critical for investors. Even after a proper KYC verification is completed, a small fraction of project leaders elect to commit fraud and steal investor funds. Look to only invest in projects that have been KYC Verified by a professional provider that investigates potential fraud, supports filing with the correct legal authorities, and provides a path to fund recovery.
For the JIYU project, if the real project owners had verified and then committed fraud, Assure DeFi’s unique Investigative (ADIIR) and Fraud Pursuit process would have completed a deep forensic investigation, worked with injured investors, leveraged Assure’s relationships with law enforcement agencies and centralized exchanges, to fully expose and potentially prosecute those who committed fraud. Further, Assure DeFi would have enabled law enforcement to pursue punishment of the fraudsters, and enabled centralized funds to be frozen for potential investor fund recovery.
Conclusion – A KYC Project Verification is Highly Valuable for Investors and Project Owners, if awarded by a Fully Qualified Profession KYC Verification Provider
The Defi space will remain a high target for scammers and fraudsters because of the huge growth and inflow of money into the market. Despite the numerous benefits of blockchain technology, Web3 protocols, and Cryptocurrency, interest and growth are diminishing due to prevalent fraud.
The promotion of and the use of proper KYC Verifications from Qualified Providers such as Assure DeFi, Certik and Obsidian Council is an excellent fraud reduction tool for all those involved in the market. If legal accountability can be maintained with the desired anonymity, the market can flourish once again. But, it will take all those in the ecosystem to demand the use of Professional KYC Project Verifications, along with the many other security tools available.