Investors are still trusting anonymous crypto founders with millions—even after the FTX meltdown

As the rivalry flared, OpenSea showed a human face to the crypto world: CEO and co-founder Devin Finzer, who had helped the company attract funding from some of Silicon Valley’s most prestigious venture capital firms. LooksRare, in contrast, had Guts and Zodd—two co-founders known only by their aliases and avatars. 

But while doing business behind the mask of an invented identity would be a huge drawback in the conventional business world, Guts and Zodd preferred it that way—and many of the crypto diehards who joined their community preferred them that way, too.

In an era when founders of traditional tech companies still enjoy A-list treatment and celebrity status, Guts and Zodd say they consider personal identities a kind of nuisance that deflects attention from their Web3 work. “It’s easy to get bogged down and distracted when having to deal with a public personal profile,” Guts tells me, using the encrypted messaging app Telegram to maintain their anonymity. (We verified their identity through business documents shared with Fortune.) “Being anonymous allows everyone to put 100% of their effort into contributing to the protocol.” 

To those of us firmly operating in Web2—the traditional worlds of business, finance, and conventional human interaction—what Guts and Zodd see as diversions equate to proof that you’re operating a legitimate business. For most founders, showing your faces to investors and filling out paperwork under your own names to confirm clear legal histories and clean financials are the entry fee for capitalism. Indeed, corporate law generally requires even private companies to list at least one person’s real name on their incorporation documents.

But for the LooksRare duo, that’s bureaucratic Web2 stuff. They just want to build. To date, neither founder has publicly revealed much about their backgrounds. Even their genders are unknown—we’re identifying each individually by the pronoun “they.” And anonymity didn’t stop Guts and Zodd from finding investors. LooksRare to date has raised nearly 1,500 ETH (Ether coins–the cryptocurrency of the Ethereum blockchain network), an amount worth more than $5 million back in March 2022, from believers in its business. 

One of those investors is Dovey Wan. Wan has been investing in blockchain and cryptocurrency endeavors through her firm, Primitive Ventures, since 2018. But her favorite types of companies and protocols are those most investors, not to mention the most traditional venture capitalists, would never touch—those led by founders or even whole development teams who choose to remain unknown.

“I’ve made a lot of great investments, with great ROI, investing in anonymous founders,” says Wan. Her firm, she explains, currently has five projects in its portfolio led by anonymous teams, including LooksRare, Synapse, and GMX. (She won’t disclose how much money her firm manages or how much she’s invested specifically in anon-led projects.) 

Of course, Wan gets questions about her unconventional investment choices. Two come up most frequently, she says: What about “rug pulls,” scams where creators hype their token to bring in buyers, then sell out once the price has risen? And what if she invests in a criminal or scammer? 

Both Wan and the anonymous founders she invests in offer the same answer to that common-sense question. In the next, decentralized version of the blockchain-based web known as “Web3,” transparency in code and lengthy relationship building are better insurance than access to someone’s full name and LinkedIn page. Even after months or years in partnership, Wan says, she still doesn’t know the “real” identities of some of the founders in whom she’s invested considerable time and money. She’s ended up meeting others in person at blockchain conferences, but often only after spending a while getting to know them, anonymously, online.

As for the relative danger of dealing with anonymous founders, recent headlines have made clear that it’s hardly the biggest risk crypto investors can face. The catastrophic demise of exchange giant FTX laid bare how a known founder, Sam Bankman-Fried, could perform seemingly trust-inspiring actions—like testifying in front of the House of Representatives on regulating the cryptocurrency industry—only to be revealed months later as a suspect in the ultimate fraud.

Lev Radin—Pacific Press/LightRocket via Getty Images

“His neo status game play and virtue signaling around ‘effective altruism’ served as a moral loophole for his crimes,” Wan says of the founder known as SBF. “This is a major wakeup call for us to short status and long substance, back to the trust ethos of don’t trust, verify.”

The surprising frequency of anonymous fund-raising

Indeed, even with the potential risks inherent in trusting the unidentifiable, many anonymous creators and founders have wound up successfully getting projects off the ground, thanks to investors like Wan. The now ubiquitous decentralized finance (DeFi) platform Sushiswap, which as of early February boasted a market cap of roughly $385 million, was built by an anonymous team. LooksRare was seeing billions in trading volume as recently as April 2022, before the NFT market took a dive. (To be sure, much of that volume was in wash sales, or users selling tokens to themselves, but that’s a whole other ethical kettle of fish.) 

Other examples of anon-led products in Web3 include DeFi loan product Alchemix, which raised $4.9 million in a funding round last March. (That funding round was led by CMS and Immutable Capital but also included Alameda Research, the now-bankrupt trading firm founded by Bankman-Fried). There’s also Synapse, a cross-chain bridge (a protocol that connects one blockchain network to another, allowing interoperability), which says on its website that it has raised close to $15 million from both venture and community funding rounds. Some of its team members have since disclosed their identities, but to this day, Wan says she still only knows the original founder by his Twitter handle. And there’s decentralized exchange GMX, which reported a liquidity pool of more than $400 million as of early February. 

Those projects gained their success because they had people willing to invest in them, either by directly donating sums of cryptocurrency, buying majority shares of their tokens, or even just offering their time, expertise, and connections in the space. These investors sometimes do all this without ever having seen the founders’ faces or maybe even heard their voices. 

What’s in a name, anyway? How much more telling is a person’s full name, resume, and date of birth than what the Web3 community can offer—an auditable record of project building, a lengthy Discord chat history, and their crypto wallet address? As for the legal protections that come with disclosure—SEC oversight and bank deposit insurance, for example—well, doing without that oversight is kind of the point. Those protections, to “anon” Web3 founders and their investors, are part of the old dysfunctional, centralized system to which they’re trying to build an alternative, for practical but also philosophical reasons.

That’s not to say that anonymity is necessarily safe, or easy. While some anon founders have seen considerable success, there have also been loads of betrayals and failures, and many investors and VCs are understandably nervous about handing over money to founders whose names and faces they can’t see. (In traditional finance, doing so could even fuel accusations of fiduciary malpractice from the investor’s clients.) Anon founders will themselves acknowledge that there can be hiccups and awkwardness to operating a company without knowing your team members, investors, or community—and that an “anon” existence can be rather strange and lonely.

But in a bear market for crypto, investors with the stomach for it are finding that the relatively low valuations of “anons,” and the potential for impressive return on investment, make for some tempting opportunities.

How ‘anon’ founders fit the Web3 ethos

Guts and Zodd borrowed their Web3 identities from characters in the anime series Berserk. They were both “heavy NFT traders and users of OpenSea in 2020 to 2021,” Guts explains; they grew “frustrated” with the platform’s “lack of simple features and slow development speed.” They decided to launch a competitor, and LooksRare was born. 

In addition to avoiding the “distractions” tied to a personal identity, the LooksRare founders say they decided to remain anonymous out of concern for their own security and that of their protocol. Names are tied to sensitive information, like cell phones that could be vulnerable to SIM swaps. In an inherently tech-savvy industry, bad actors know how to exploit accordingly: Someone impersonating them could try and trick investors into sending their cryptocurrency to wallets not connected to the project they’re attempting to support. An impersonator could even steal from an investor using identifying information like their full name and the phone number connected to their wallet.

Wan points out other, practical reasons for the LooksRare founders’ anonymity. One issue is the continuing legal dispute around the tokens that they and other creators deploy to reward users. The SEC and others argue that tokens like their LOOKS can be seen as securities, which could put the founders at legal risk, since they’ve sold the tokens without registering them with the government. Since OpenSea is a company headquartered in the U.S., it’s subject to certain rules and regulations that can make it less accessible to users in locations with stricter regulations around cryptocurrency than a protocol like LooksRare, which doesn’t have a known corporate home. Other experts note that anonymity and lack of a corporate structure can also make it tricky for governments to figure out whom to tax—a fact that benefits founders but drives regulators crazy.

Many, perhaps most, would argue that complying with those rules protects investors and customers. It can be hard to wrap a Web2 head around these Web3 motivations. But the desire for anonymity goes deeper than practicality. “We are also strong advocates for privacy in general,” Zodd says. “Most of all, we believe in the Web3 ethos and a future of decentralization, which can become difficult when pegged to individuals.”

Web3, after all, has sprung from the work of the ultimate anonymous founder. Instead of publicizing their identity (or identities), Bitcoin whitepaper writer “Satoshi Nakamoto” built trust by posting regularly in forums like Bitcointalk.org and the cypherpunk mailing list.

“I got into crypto quite early and was quite inspired by Satoshi’s spirit of staying anon and letting the transparent code serve the world,” E, the anonymous creator of a decentralized exchange on a version of Ethereum, tells Fortune via Telegram. (E is withholding the name he uses in Web3 and the name of his protocol for privacy reasons.) “I think transparency and auditability are much more important than staying anon or not.”

The ethos of Web3 was so important to E and the LooksRare founders that they all say they turned down initial offers for venture capital funding. They didn’t think accepting those VCs’ funds would mesh with the spirit of the next generation internet they want to help build. 

LooksRare opted for community support over VC investments in the initial bootstrapping phase of the platform “despite quite high interest,” Guts says. Zodd explains why: “Everyone that participated was aligned with what we wanted to achieve and saw the same gap in the market that we did. That was key…We wanted to create and return as much value to the community as we could.”

That means neither of these anonymous founding teams raised money in the traditional way to get their projects off the ground. LooksRare raised 1,488.75 ETH from 69 early supporters who could contribute at one of three tiers—7.5 ETH, 18.75 ETH, or 37.5 ETH. That funding has been used to provide liquidity for the LOOKS token on the exchange Uniswap. 

Like LooksRare, says Wan, Synapse also started with a raise from a “small circle” of people that the founding team was already mostly in communication with. GMX, she adds, has raised money only by publicly selling its tokens. To become one of the biggest stakeholders in that exchange, Wan gradually acquired more and more of its token via the secondary market and OTC deals, she says. Wan says she also helped one anonymous protocol creator by paying the fee to audit his code when he didn’t have the money to do so himself. Overall, it’s a much more hands-on form of investment than the traditional VC fundraise. 

“Oftentimes, we tend to work together, so we brainstorm an idea,” Wan says. “In the LooksRare case, the founders and I have been thinking about how to vampire attack OpenSea for a long time.” 

The challenges of building trust

When I ask Wan about other investors who regularly back anonymous Web3 founders, she has trouble coming up with any. It’s not the easiest task—building trust takes time, effort, and genuine interest.

To build that trust, anonymous founders rely on deep connections they’ve already built in Web3, by being active on social platforms like Twitter, where a full name isn’t needed to establish comradery. Guts and Zodd, for example, initially got connected with Wan via a mutual Web3 acquaintance they refer to as “Dingaling,” the moniker he uses on Twitter (Zodd describes him as “one of our earliest supporters and a very well-known NFT collector”). Dingaling, who Wan also knew from Twitter—but whose real-life identity she didn’t know—figured she would be interested in LooksRare, and his ability to vouch for the founders served as the foundation for a trusting relationship. 

Guts and Zodd had already been working on LooksRare for a few months by the time Dingaling made the introduction. They had a product demo to share, which spoke for itself. In Web3, Guts says, “Trust is 100% determined by your actions, and also verifiable on chain.” 

In other words, the code of a product created by an anonymous Web3 founder can be available for a potential investor to examine. Audits and security checks help investors like Wan ensure they’re protecting themselves against a potential rug pull. And even without a name tied to a resume (or a LinkedIn), anonymous founders can build work histories by publicly sharing their work.

“As long as you are consistently building, people notice it and a good community is formed [around you],” E says. He says he’s also on Discord “every day” talking to his community about how to improve his protocol, and he’s had his code audited by professional firms.

Of course, not everyone is swayed by viewable code and regular Discord chats. Zodd says their team’s anonymity “definitely hindered hiring and growing the team initially.” (Yes, even colleagues building in Web3 often don’t know each other’s real names.) “Anyone joining the team is taking on a degree of personal risk,” Zodd continues. They also lament that they can’t meet up with their community members in real life. In that sense, it can be a lonely life for the anon founder.

“I cannot really meet crypto friends in person,” E says, “though I do make a lot of virtual friends along the way.”

Many Web3 investors won’t back a fully anonymous team. “Most of the people that I’ve invested in, I knew all of them, either in real life or they were doxxed,” says podcaster, Orca Protocol contributor, and occasional Web3 investor Chase Chapman. (To be doxxed is to have one’s identity revealed by third parties.) Chapman says she writes “smaller angel checks,” so the stakes aren’t quite as high for her as for big-time backers. But she acknowledges the reputational damage that could come with investing in the wrong anon team. “By angel investing, you’re putting your stamp of approval on something,” she says.

However, there are “proxies for trust” Chapman considers in the case of anonymous teams—like if someone she knows well and trusts advocates for the project, or a certain firm has conducted due diligence. Such proxies can be fallible, of course, even when founders aren’t anonymous. The crypto coin Luna and supposed stablecoin TerraUSD, created by entrepreneur Do Kwon through his company Terraform Labs, crashed massively last May, despite early backing by big-name establishment investors like Lightspeed Venture Partners and Mike Novogratz’s Galaxy Digital (Novogratz even got a Luna tattoo). And of course, Sam Bankman-Fried was anything but anonymous, with his vigorous courtship of regulators, lawmakers, and the media.

Woohae Cho—Bloomberg via Getty Images

Legal and regulatory issues obviously plague any interaction with an anonymous founder, but many get around that by not exactly being a company (LooksRare, the founders assure me, has no equity behind its protocol) and not being incorporated in a specific location. Wan brings up the overall lack of regulatory certainty in the crypto industry and is honest about how they’re essentially operating in a legal gray area. 

“There’s no real person you can go after,” she says. “These anonymous developers…I consider them like modern age pirates. There’s good pirates, there’s also bad pirates.” 

What’s in a name?

Not all anonymous founders stay anonymous forever. Sometimes, that’s by choice. Wan says she’s had some share their travel schedules with her, and they’ve met up in person after months of online only communications. Some choose to “voice dox” themselves by getting on calls, but still don’t reveal their faces.

Other times, it’s not up to the anonymous founder if their identity is revealed. Take the controversy in which BuzzFeed News published an article in February 2022 revealing the identities of the founders of the Bored Ape Yacht Club (BAYC), a high-profile NFT project whose cartoon apes were bought by celebrities like Gwyneth Paltrow and Snoop Dogg. The publication was able to do this because Yuga Labs, the company behind BAYC, is incorporated in Delaware, with publicly accessible records linked to the two founders. (The company’s then-CEO, Nicole Muniz, ultimately confirmed their identities to BuzzFeed News.)

People took this doxxing in several ways. Some, like Zodd, found it “pathetic and unjustified”—an act that flies in the face of Web3 mores around privacy and autonomy. Others considered it inevitable, since the men’s names weren’t exactly hidden—BuzzFeed just had to dig through public business records to find them. Still others felt that the amount of capital the founders controlled (at the time, the company was heading towards a possible $5 billion valuation) meant they should be held accountable for their substantial influence.

Even when they don’t establish a registered U.S. corporation, many clues can key people into aspects of anonymous Web3 creators’ identities. It’s difficult to hide a time zone, for instance—everyone has to sleep, and therefore be offline for certain hours each day—and speech patterns. In communicating with anonymous founders for this story, I found myself looking for such hints—like the British spelling of a word instead of an American one.

Zodd has not revealed their identity to anyone who’s contributed ETH to LooksRare. They acknowledge that getting doxxed is “always a possibility, but it’s something that’s not worth anticipating too much. If it happens, then it happens.”

E is considering attending crypto conferences, particularly as some are becoming “anon friendly.” Devcon Bogota, for instance, does not require an ID for a general admission ticket. E tells me he may go to conferences like these and show his face, but maybe still not tell people his name.

Some Web3 investors and creators have found themselves regretting working with anons. Say, for example, you have an inkling that a key player on your project is a convicted credit card fraudster behind a nearly $200 million alleged exit scam. That’s essentially what happened to Daniele Sestagalli, cofounder of investment-focused DAO (decentralized autonomous organization) Wonderland, before he learned that the DAO’s treasury manager, “Sifu,” was really Michael Patryn. Patryn cofounded QuadrigaCX, a now defunct Canadian cryptocurrency exchange responsible for a high-profile scandal that lost thousands of users their money. Then again, Patryn’s QuadrigaCX cofounder, Gerald Cotten, was not anonymous while running that exchange.

As the crypto bear market continues, and money in the industry gets tighter, might investors like Wan be less willing to take a gamble on an unknown?

“We have to be much more valuation sensitive,” Wan says. But that plays in anonymous creators’ favor: Wan points out that the valuation of companies led by known founders generally has the potential to climb much higher than those led by anons. “Most of these anon founders [are] super cheap, to be honest.” In a bear market, in other words, the price is right for anonymity.