As you probably know, TFG sold a bunch of “trading cards,” also known as “NFTs.” After watching him raise 4.5M, which will most likely go to his legal bills, a coworker/friend messaged me with something like, “Let's do this, but give all of the money to Democrats LOL” and thus, Kaboom Crypto was born. We are hoping to launch on January 6th and, in our dreams at least, raise more for progressive candidates than Trump was able to raise to try to keep himself out of prison. In the process, we are rapidly learning about crypto tech and how TFG adapted to the challenges of creating his own profitable and legal token. Spoiler alert, he probably didn’t
One of the challenges of doing a high-value NFT campaign is that most people don’t know how to readily buy cryptocurrency or how to use it to purchase NFTs and so the ideal scenario for an NFT seller is to be able to accept credit cards, but this creates a huge problem, namely fraud. When we were first looking at this we were thinking we would need to deal with a little bit of fraud, but we quickly realized that any system that lets you buy cryptocurrency with a credit card is basically an ATM for stolen credit cards.
The root problem here is that even if the cardholder claims fraud or does a chargeback, there is no way to reclaim the tokens. Instead, the fraudster can anonymously trade the token and eventually cash out. Even if the token loses 90% of its value, it's still a good deal for them because it wasn’t their money in the first place.
Now, the big cryptocurrency exchanges like Binance and Coinbase are regulated and have KYC processes in place, which typically involve steps like showing them your passport, and utility bill, and verifying some transactions in the account you want to link to your digital wallet. As far as I can tell TFG’s site doesn’t do any of that.
So how did he avoid massive fraud? As far as I can tell he didn’t and there is a probably huge fraud story that will take a few months to develop. The crazy thing is that the way the contract is set up, they will be collecting 10% of every transaction in perpetuity, even if they knew going into it that they were going to have a fraud or money laundering problem.
We did ultimately come up with a workaround, but it requires sending a piece of physical mail in order to “unlock” purchased tokens, which is less than ideal and something I think we would have heard about TFG implementing.