It’s not often you come across a project that lists Vitalik Buterin, Ethereum’s inventor, as an investor, but there is one such project that proudly does so and further “confirmed” to us that Vitalik Buterin is an investor.
TenX, a cryptocurrency debit card that allows you to spend your eth or btc at any merchant which accepts Visa or Mastercard, says on their finalized whitepaper version that they are:
“Backed by highly experienced investors such as Vitalik Buterin (creator of the Ethereum foundation), David Lee (FinTech Professor at Singapore Management University), Bo Shen (Partner at Fenbushi Capital) and many others to guide us on our journey.”
This unequivocal statement is scattered throughout the whitepaper and even on the homepage where Buterin, although slightly more ambiguously, is listed as an investor.
That, however, is not true by any common meaning of the term. It’s Fenbushi Venture Capital, a China-based venture capital firm that exclusively invests in Blockchain-enabled companies and has invested in many of them, including Circle, Sia, Bloq, Chronicled, Everledger, and far too many others, that invested in TenX.
Vitalik Buterin is listed as a General Partner at Fenbush Capital. He told us: “Fenbushi is an investor. I personally am not.” We asked whether he thinks it is fair TenX lists him as an investor, with Buterin’s reply being a simple “I’ll talk to them.”
Julian Hosp, co-founder of TenX, stated in reply to our request for clarification that “the whitepaper should say he is an investor. We don’t list him (and have never listed anyone) as an advisor on our website or whitepaper… for TenX he is only an investor.”
We don’t think that’s a fair characterization at all by any common sense definition of investor. Fenbushi Capital was set up by Wanxian or one of their subsidiaries, a giant Chinese conglomerate that has been very forward looking and supportive of this space.
Going from that to stating they are backed “by highly experienced investors such as Vitalik Buterin (creator of the Ethereum foundation),” seems very misleading, not least because Buterin has not invested any of his funds in Fenbushi Capital if our memory servers correctly.
It is a debacle of significant proportions because they hope to raise tomorrow a maximum of 200,000 eth, currently valued at some $67 million. “200K is actually low,” Hosp told us. “I guestimate we could raise 500K ETH” he later said, “most people think small and short term. We would have funds for 5-6 years to go fast and big. People don’t get that, because they only have an idea. We have a clear vision on where to go.”
Such vision isn’t very clear on the whitepaper. They talk of a Commit Network, but dedicate only two paragraphs or so out of 52 pages to explain what it is, with one paragraph stating:
“We use Cross-chain Payment Channels and the COMIT Routing Protocol to allow our users to use their blockchain assets in real-time in the real world. TenX will be the first liquidity provider in the network to offer real-world payments. By using the COMIT Routing Protocol, a user can use any blockchain asset for his payments.”
For $67 million, you’d expect more detail of just what exactly any of this is, but at least they have a vision which includes acquiring a banking license. However, it’s not clear whether any steps have been taken towards it since Fenbushi gave them the $1 million seed capital, but we are told the acquisition of the banking license is “planned.”
What we’re left with from that vision is what they have already launched. They have a wallet usable only by android OSs, they have an agreement with Visa and Mastercard according to the whitepaper, so for $15 you can order a crypto debit card from them, and then you can use that card to pay wherever they accept visa or mastercard after you’ve sent some eth or btc to the wallet.
The way the card works is fairly simple. You send eth, then TenX converts that to fiat on Kraken or Poloniex, giving the merchant dollars, all of it automated. So you can just pay with eth by taping as with any card if you are not in US. They plan to serve US later.
It’s not a novel idea and there are many other similar projects, but interestingly they say there are zero transaction or foreign exchange fees. That turns out to require an asterisk because Holm told us they get 2% in fees from each transaction but that is not paid by the end user, it is instead paid by the merchant.
Vitalik Buterin tested the card Holms told us and he helped with the Comit protocol, but much of it would have sounded a bit more impressive if their marketing had not been so aggressive.
Getting seed funding from Fenbushi Capital, or really any reputable VC, is respectable in itself since it suggests they did some due diligence. There was no need whatever to try and appear stupendously impressive to the point where anyone knowledgeable would raise eyebrows by splashing Buterin’s face everywhere while calling him an investor.
Nor would anyone with some intelligence believe there are zero fees, since the crypto has to be converted to fiat and exchanges don’t do that for free, so someone has to cover it. That the merchants do so is fine, but that appears to not be stated, which isn’t fine.
So this project has some significant red flags, especially in marketing, which go beyond many red flags we have seen for other projects, and very close to the edge of the grey area.