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Once scammed for ten grand, this VC is building a crypto security vault

One of the barriers to bringing cryptocurrency into the mainstream is the frequency of fraud in the space. Last year alone, more than $3.9 billion worth of crypto was “lost,” according to an industry report, even though the number was already down roughly 50% from the year before.

Francois Le Nguyen, an angel investor and former general manager at Entrepreneur First, is among the victims of crypto scams: In a phishing attack on Discord, he lost $10,000 worth of Ethereum and NFTs.

If even prudent investors like himself and notable NFT figures such as Kevin Rose are susceptible to wallet hacks and scams, everyone else is vulnerable, Le Nguyen told TechCrunch in an interview.

"The motivation is to prevent my family members, my friends from getting screwed because I know that eventually one of them will be screwed," he said. "While we talk about owning your own keys as the next wave of the way you should manage your assets, if you don't have the tools to protect yourself, disasters are gonna happen, because every single thing you interact with could be a potential threat, which is so scary."

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The distressing loss prompted Le Nguyen to develop security solutions for crypto transactions with the help of his co-founder Jake Harwood, an effort that eventually became Staging Labs. Today, the startup, which currently has three full-time staff, announced that it has raised $1.1 million in an oversubscribed pre-seed round.

"Recent events in the U.S. banking industry are a reminder that there are regulatory and system protections that we often take for granted in the TradFi [traditional finance] world," said Flourish Ventures' Kabir Kumar, an investor in Staging Labs. "Those protections have yet to be built in the crypto world. Individuals are expected to fend for themselves, especially against fraud and scams."

That's where Staging Labs comes into play. Initially, the startup aimed to create an "SOS button" for crypto transactions, something akin to a credit card's freezing option. But it soon realized the limitations of this approach -- what if a user is away from their device? It reiterated on the concept and came up with a more advanced version called Saferoot that can actively and automatically scan transactions 24/7.

In a malicious attack, Saferoot works by automatically transferring digital assets from a vulnerable wallet to a backup safe. This is done by intercepting a transaction after a user clicks "send" but right before the funds go through.