Economy

Sourcing That Mango: Blockchain Brings Transparency To Food Supplies

The information storage technology can safeguard entire transaction histories and allow firms and consumers to see where food ingredients came from — and fast.

Birds keep track of these crops in Argentina
Birds keep track of these crops in Argentina

BUENOS AIRES It was the central subject of a farming conference this month in Argentina: How can blockchain help the agriculture sector? Blockchain is a data structure where information is kept in linked blocks, each of which contains the cryptographic hash of the previous block. This means any change of information in one block would alter data in subsequent blocks.

Luis Macias of Grainchain Inc., and Martin Hagelstrom of IBM, explained that their respective firms are testing some of the benefits the technology can have in supporting food supplies.

Macias says blockchain "helps us decentralize processes." Grainchain, a UK-based "ag-tech" platform for commodities trading that uses blockchain, offers users the possibility to make well-protected contracts between buyer and seller and ease the process of signature between people who don't know each other. "It is a very efficient ecosystem that allows you to qualify each transaction," says Macias, the company's founder. "Users can be certain they will receive the grain or will be paid."

Macias says that when a "buyer goes out looking to buy, our system shows him all available variables automatically, and the user can modify the variable as he or she wants. A trust fund is created in a bank, in a currency of the buyer's choice. All the money is in that fund and payment is only made when the buyer has received the grains."

They went from requiring six days to barely two seconds.

Trust and transparency are the key words in understanding blockchain's benefits, but also efficiency and easier traceability. Hagelstrom says blockchain allows for interaction between various participants inside a business network. "It allows for a single version of the truth. If there is only a single register that can be seen in real time, the process becomes more efficient and cheaper," he explained. The system IBM is creating, he said, is designed to register every step of a product's supply chain.

IBM's first experiences were with mangos in Mexico. They went from requiring six days to barely two seconds, to determine the origin of every product offered on Walmart shelves. Hagelstrom cites two benefits: "traceability and certificate management." He said many firms were now incorporating blockchain, and this could help create a crucial network effect. "As technology, it is ideal when there are many participants, when there's an ecosystem. It can help generate trust," he says.

Hagelstrom is optimistic on the technology's increasing use in Argentina, beginning with "something small, then showing results and growing from there." Firms, he said, could "join these networks within five years or start helping to build them today. All the information already exists and each actor in the chain gives it to the next or previous actor in the chain. Right now we're standardizing the information and making it available for the entire chain and the consumer."

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Economy

Air Next: How A Crypto Scam Collapsed On A Single Spelling Mistake

It is today a proven fraud, nailed by the French stock market watchdog: Air Next resorted to a full range of dubious practices to raise money for a blockchain-powered e-commerce app. But the simplest of errors exposed the scam and limited the damage to investors. A cautionary tale for the crypto economy.

Sky is the crypto limit

Laurence Boisseau

PARIS — Air Next promised to use blockchain technology to revolutionize passenger transport. Should we have read something into its name? In fact, the company was talking a lot of hot air from the start. Air Next turned out to be a scam, with a fake website, false identities, fake criminal records, counterfeited bank certificates, aggressive marketing … real crooks. Thirty-five employees recruited over the summer ranked among its victims, not to mention the few investors who put money in the business.

Maud (not her real name) had always dreamed of working in a start-up. In July, she spotted an ad on Linkedin and was interviewed by videoconference — hardly unusual in the era of COVID and teleworking. She was hired very quickly and signed a permanent work contract. She resigned from her old job, happy to get started on a new adventure.


Others like Maud fell for the bait. At least ten senior managers, coming from major airlines, airports, large French and American corporations, a former police officer … all firmly believed in this project. Some quit their jobs to join; some French expats even made their way back to France.

Share capital of one billion 

The story began last February, when Air Next registered with the Paris Commercial Court. The new company stated it was developing an application that would allow the purchase of airline tickets by using cryptocurrency, at unbeatable prices and with an automatic guarantee in case of cancellation or delay, via a "smart contract" system (a computer protocol that facilitates, verifies and oversees the handling of a contract).

The firm declared a share capital of one billion euros, with offices under construction at 50, Avenue des Champs Elysées, and a president, Philippe Vincent ... which was probably a usurped identity.

Last summer, Air Next started recruiting. The company also wanted to raise money to have the assets on hand to allow passenger compensation. It organized a fundraiser using an ICO, or "Initial Coin Offering", via the issuance of digital tokens, transacted in cryptocurrencies through the blockchain.

While nothing obliged him to do so, the company owner went as far as setting up a file with the AMF, France's stock market regulator which oversees this type of transaction. Seeking the market regulator stamp is optional, but when issued, it gives guarantees to those buying tokens.

screenshot of the typo that revealed the Air Next scam

The infamous typo that brought the Air Next scam down

compta online

Raising Initial Coin Offering 

Then, on Sept. 30, the AMF issued an alert, by way of a press release, on the risks of fraud associated with the ICO, as it suspected some documents to be forgeries. A few hours before that, Air Next had just brought forward by several days the date of its tokens pre-sale.

For employees of the new company, it was a brutal wake-up call. They quickly understood that they had been duped, that they'd bet on the proverbial house of cards. On the investor side, the CEO didn't get beyond an initial fundraising of 150,000 euros. He was hoping to raise millions, but despite his failure, he didn't lose confidence. Challenged by one of his employees on Telegram, he admitted that "many documents provided were false", that "an error cost the life of this project."

What was the "error" he was referring to? A typo in the name of the would-be bank backing the startup. A very small one, at the bottom of the page of the false bank certificate, where the name "Edmond de Rothschild" is misspelled "Edemond".

Finding culprits 

Before the AMF's public alert, websites specializing in crypto-assets had already noted certain inconsistencies. The company had declared a share capital of 1 billion euros, which is an enormous amount. Air Next's CEO also boasted about having discovered bitcoin at a time when only a few geeks knew about cryptocurrency.

Employees and investors filed a complaint. Failing to find the general manager, Julien Leclerc — which might also be a fake name — they started looking for other culprits. They believe that if the Paris Commercial Court hadn't registered the company, no one would have been defrauded.

Beyond the handful of victims, this case is a plea for the implementation of more secure procedures, in an increasingly digital world, particularly following the pandemic. The much touted ICO market is itself a victim, and may find it hard to recover.

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