failure family
fraud and misconduct
- moral-compartmentalization: Under strong institutional and cultural forces, decision makers in financial institutions tend to compartmentalize their lives and disconnect their mo
- fee for diligence never performed: Funds of funds claimed to select the best managers through skilled due diligence and charged standard 2 and 20 fee structures for that service, while
- due diligence theater: Advertising an elaborate multi limb due diligence process is no evidence that it was applied: Madoff's asset management advisers FIM Limited and FIM A
- identifiability-enables-corruption: Corruption is possible whenever actors in a governance design can be identified, and every historical instantiation of institutional governance design
- identity based corruption: The identity of actors in a DAO governance design typically creates corruptive elements, and merit identifiers other than individual identity remove t
- Speculative Influx and Fraud Chasm: The profit driven influx into the digital asset space brought rampant fraud that created a chasm between the decentralized asset space and mainstream
- universal corruption: Corruption has arisen in every organizational circumstance in recorded history, including the least extreme case of identified members of a single cul
- Perceived Market Impact Invites Corruption And Regulation: If the DAOIC is perceived as having a market impact, it could significantly increase corruptive influences from other market players, which in turn in
- manipulation as the shadow of cooperation: The same ability to learn from others' behavior that unleashes the efficiency of cooperation also gives people untold power to trick others, imagining
- Ponzi and rug pull degeneration: At their worst, DAOs produce ponzi schemes and rug pulls, and these failures damage the credibility and future of web3 as a whole, not just the indivi
- Rug pull share of illicit crypto revenue: Rug pulls grew sharply as a share of crypto crime: of the $7.7 billion in total illicit crypto revenue in 2021, 37 percent came from rug pulls, up fro
- Rug pull attributed to missing decentralized governance: The author contests the myth that DAOs are generally run by scammers: many DAOs and users have indeed fallen victim to rug pulls, but most of those ru
- DAO concentration among largest rug pulls: DAO projects accounted for a material share of the largest crypto frauds of the year: two of the top six crypto rug pulls in 2021 were DAO projects.
- Token sale pool drain at close: A DAO token sale can be drained at the moment of closing: in the Anubis DAO sale 13597 ETH was removed from the token sale pool and sent to another ad
- Privileged insider control of keys and code: Most DAOs that suffer unethical behavior and rug pulls are abused by insiders, and this is possible because insiders are not properly governed and hol
- Insider backrunning of a scheduled buyback: Insider knowledge of contract internals is itself an attack surface: at Snowdog DAO an insider who knew a challenge key embedded in the DAO contract b
- Founder cash-out at public expense: Even after the ICO boom of 2017 and 2018, many digital asset projects and token launches are designed with the primary focus on benefiting the foundin
- Rug pull: Community DAO governance makes any form of rug pull much less likely, because rug pulls typically benefit only a few select individuals who retained c
- Whale insider code bribery: Rug pull practices can take the form of a whale guaranteeing an inside developer or business head a percentage participation if that insider changes t
- slow-rug-pull: Lobby3 was effectively attacked from within: founders maintained heavy control and slowly diverted funds to themselves, producing a very slow rug pull
- Bounty hunter defection: Bug bounty programs fail at their own premise because the hackers they pay to demonstrate exploitability frequently sell or exploit the bugs they find
- Carbon Credit Execution Failure: Kaal concedes that at their worst Impact 1.0 carbon credits are non transparent, fraudulent and fail to mitigate climate change, but contests the infe
- unregulated-ico-fraud: The 2017 ICO wave democratized access to investment and spurred blockchain innovation, but the absence of regulatory oversight produced numerous fraud
- fraudulent submission and moderation failure: Decentralized data production will succeed only if it solves fraudulent submissions, content moderation, and alignment with ethical and legal framewor
- Take the money and run: The absence of accountability mechanisms in anonymous, automated smart contracts encourages a take the money and run mentality, which makes a historic