Fraud Resistance

The protocol guards against several fraud vectors, following patterns established by protocols like Goldfinch.


Fraudulent Seller, Honest Investors

Scenario: A seller submits fake invoices for non-existent goods.

spinner

Guards

Guard
Description

Verification Process

Documents cross-referenced with debtors

Debtor Confirmation

Direct outreach to confirm obligation

Seller Staking

Sellers stake collateral against fraud

Legal Recourse

Off-chain agreements enable prosecution

Reputation System

New sellers face stricter scrutiny

Why It's Hard to Pull Off

1

Verifiers contact debtors directly.

2

Fake debtors are detectable.

3

Seller stake provides immediate loss.

4

Legal consequences for fraud.

5

Platform ban prevents repeat attempts.


Seller-Investor Collusion

Scenario: A seller colludes with investors to extract capital.

spinner

Guards

Guard
Description

KYC/KYB Separation

Verification that parties are unrelated

Debtor Independence

Debtors must be third parties

Pattern Detection

Monitoring for suspicious relationships

Multiple Investors

Large assets require multiple funders

Why It's Hard to Pull Off

1

KYC shows if parties are related.

2

Debtor must be real, independent company.

3

Unusual patterns trigger review.

4

Requires fooling multiple parties.


Verification Manipulation

Scenario: Verifiers approve invalid assets for bribes.

spinner

Guards

Guard
Description

Verifier Staking

Stake slashed if approved assets default

Random Assignment

Verifiers randomly selected, hard to predict

Multiple Verifiers

High-value assets require multiple approvals

Reputation System

Long-term reputation more valuable than bribes

Why It's Hard to Pull Off

1

Can't predict which verifier assigned.

2

Bribing multiple verifiers expensive.

3

Stake loss exceeds potential bribe.

4

Reputation damage ends career.


Fraudulent Investors, Honest Seller

Scenario: Investors manipulate a legitimate seller's asset.

spinner

Guards

Guard
Description

Smart Contract Settlement

Payments go to escrow, not investors

Transparent Flow

All distributions on-chain

No Early Withdrawal

Funds locked until maturity

Why It's Hard to Pull Off

1

Investors can't redirect debtor payments.

2

Settlement is automatic via smart contract.

3

No way to extract more than entitled.


Platform Insider Threat

Scenario: Platform team member exploits access.

Guards

Guard
Description

Multi-sig Controls

No single person controls funds

Time-locks

Delays on sensitive operations

On-chain Transparency

All actions visible

Limited Access

Smart contracts hold funds, not team

Why It's Hard to Pull Off

1

Funds in smart contracts, not team wallets.

2

Multi-sig requires multiple conspirators.

3

Time-lock allows detection before execution.

4

On-chain actions are auditable.


Summary

Fraud Vector
Primary Defense
Secondary Defense

Fake invoices

Debtor verification

Seller staking

Seller-investor collusion

KYC separation

Pattern detection

Verifier corruption

Random assignment

Multiple verifiers

Payment diversion

Smart contract escrow

On-chain settlement

Insider abuse

Multi-sig + time-lock

Transparency

circle-info

No system is 100% fraud-proof. These guards make fraud difficult and expensive, but some risk remains. Diversify investments accordingly.

Last updated