Failure of a project is a natural and common thing when investing in startup ventures, especially when it comes to cutting edge technologies such as cryptocurrency applications. Doing due diligence won’t prevent failed investments made in good faith, but it can make sure to weed out projects that will raise obvious red flags if vetted thoroughly. In the case of Litepay, this has evidently not been done, and a lot of the community is now angry.
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Oops
The Litecoin Foundation has issued an announcement to the LTC community on Monday, informing them that Litepay has ceased all operations and that the CEO claims to be preparing to sell the company. This happened after the foundation questioned him about a lack of transparency and in return he asked for more funds to continue operations. The foundation refused any further funding as the CEO was “unable to provide a satisfactory picture of where the money had been spent and refused to go into exact details about the company and show objective evidence to back up his statements.”
The organization took responsibility for the incident, stating: “We are greatly disheartened that this saga has ended in this way and we apologize for not doing enough due diligence that could have uncovered some of these issues earlier. We are currently working hard to tighten our due diligence practices and ensure that this does not happen again.”
Litecoin creator Charlie Lee also twitted out a personal mea culpa on his part, saying: “Like everyone else, we got too excited about something that was too good to be true and we optimistically overlooked many of the warning signs. I am sorry for having hyped up this company and vow to do better due diligence in the future.” Despite this honest message, a large part of the LTC community is apparently not quick to forgive him, with top ranked social media posts questioning Charlie’s leadership and status in the wake of this debacle.
Crowd-Sourced Due Diligence
Litepay was supposed to be a LTC merchant payment processor and debit card that will greatly enhance the ease of spending for the cryptocurrency’s holders. What triggered the foundation to question the project was a disastrous Reddit AMA (ask me anything) by the CEO Kenneth Asare.
Asare got grilled during the AMA session, as he tried to evade questions and wasn’t able to provide satisfying answers to many concerns. He was accused of trying to run a one man show for a project that would require a whole team to complete. The project’s website also didn’t pass a simple inspection as many details were missing, raising allegations of being a scam. By doing this, the community was actually crowd-sourcing part the due diligence process of Litepay that needed to be done by the foundation beforehand.
How should cryptocurrency communities, organizations and investors make sure they vetted a project enough? Share your thoughts in the comments section below!
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