Blockchain Venture Capital Criticized for Ponzi-like Schemes

Romeo Kuok, a board member at BGX Ventures, has raised concerns about the current state of venture capital in the blockchain industry. He argues that most deals are structured for quick exits rather than sustainable enterprise revenue, which he likens to a Ponzi scheme. This model prioritizes rapid token churn over long-term value creation, leading to a cycle where new investors are constantly needed to support the promised rewards of earlier investors.

Kuok's critique highlights the fundamental difference between traditional venture capital and token-centric funds. Traditional VC tolerates early losses to cultivate long-term value, while token-centric funds focus on immediate liquidity through initial exchange offerings, staking subsidies, and insider unlock schedules. This approach often sidelines product-market fit, leading to a proliferation of zombie protocols that are kept alive by artificial emissions and empty liquidity pools.

The consequences of this model are becoming increasingly clear. Regulators are accelerating enforcement, courts are handing down multi-year sentences, and talent is migrating to sectors where equity rewards genuine traction. The recent case involving the co-owner of three virtual-currency platforms, who was sentenced to 97 months in prison for raising over $40 million on promises of guaranteed returns, exemplifies the risks involved. The money was recycled to pay earlier investors and finance personal luxuries, a classic hallmark of a Ponzi scheme.

Kuok's concerns are echoed by the broader industry trends. Engineers lured by inflated token grants often find themselves maintaining abandoned codebases, while institutional allocators are quietly writing down their digital asset positions and redirecting risk capital to sectors with more transparent accounting. Each collapse or indictment in the Web3 space hardens public skepticism and furnishes ammunition for critics who argue that all tokens are thinly veiled gambling chips.

Developers building decentralized identity or supply chain provenance tools are now forced to justify the very existence of tokens before audiences that no longer distinguish between utility coins and outright scams. The common denominator among all these determining factors is a funding model that rewards narrative over substance. As long as term sheets treat tokens as the exit, entrepreneurs will optimize for hype cycles instead of actual user needs.

Kuok suggests that regulation can raise the cost of hollow token launches, but capital must finish the job. The European Commission’s decision to tighten stablecoin oversight under MiCA signals the arrival of adult supervision and a real recognition that consumer protection matters more than maximalist ideology. Limited partners should demand utility milestones, such as measurable throughput gains, audited security proofs, and real user adoption, before any token unlocks. Funds that replace 24-month vesting calendars with five-year lockups linked to protocol fee share will filter out rent-seekers and redirect resources to genuine engineering.

Web3 still has potential, offering censorship-resistant finance, novel coordination tools, and programmable ownership. However, potential is not destiny, and the gears need to turn in harmony and the right direction. If the money continues to chase quick-flip ponzinomics, the movement of Web3 will remain a slot machine masquerading as progress, while innovators capable of delivering the future steadily walk away. Kuok urges the industry to break the cycle now so that the next decade can see Web3 fulfill its promise of an internet that serves people, rather than serving them up for Ponzi VCs as exit liquidity.