BOOK EXTRACT

Eran Eyal, the South African fraudster who took the tech world for more than $40-million

By Stephen Timm 23 February 2021

Eran Eyal had it all: a trendy New York apartment, a jet set lifestyle and investors lining up to get in on his million-­dollar cryptocurrency start-up, Shopin. But in 2018 the US authorities charged him with fraud and packed him off to Rikers Island. The scam by the middle-class boy from Durban spanned investors across the globe: a house of cards involving fictitious products, clients and advisers for Shopin and his previous company, Springleap. More than $40-million went up in smoke.

During this time Eyal attempted to win over investors by touting Shopin’s solution as a godsend for struggling US retailers. At the North American Bitcoin Conference in Miami in January 2018, he gave the example of a shopper who went to Nike’s online store, Nike.com, and viewed 20 items before going over to Adidas.com to buy a pair of pants.

Strutting proudly onto the stage in his trademark wear of a dark tailored suit and open-neck shirt, and with calm confidence, Eyal began. “What’s wrong with this in the world today?” he exclaimed. “Well, for 30 days because of cookies and pixel tracking you are going to be assaulted as a user by adverts that are utterly irrelevant to you. What’s the bleed for Nike and the industry advertising like this when the money totally flows out of the economy? Does it go to you the reader whose data it is? No, it doesn’t go to you. Does it go to the retailer? No. It goes to Facebook, it goes to Google, and it goes to all sorts of ad exchanges, making them richer, but it never comes back to the economy. That’s kind of scary, right?”

He was working the crowd up, playing on their anxieties over what big tech did with internet users’ personal data. But he wasn’t finished explaining things. “And then when you look at Adidas.com, well, Adidas is a mortal enemy of Nike, so they never see this signal that ‘hey this user just bought this pair of pants, maybe show them something complementary.’”

The web and e-commerce were “broken”, as Eyal put it, quoting a figure that “$1.4-trillion” was lost every year in abandoned shopping carts. The time had come for retailers to band together with users, to face the big bully Amazon. To beat Amazon, retailers had to adopt the e-commerce company’s tactics, or, as Eyal might say, like a martial artist, to overcome your opponent you must use their own weight against them.

Pointing to the name “Amazon”, which suddenly appeared projected on the screen behind him, Eyal indicated that 30% of the e-commerce giant’s revenue was generated from its product recommendation bar alone, with 89% of Amazon’s revenue attributable to personalisation according to purchase data – the one thing, he claimed, no retailer was willing to share with another. Then he homed in on Amazon’s product recommendation bar, which effectively accounts for 10% of US retail sales. These were shocking numbers.

Retailers, he argued, were getting a raw deal from Amazon – because when they chose to sell their products on the retailer’s website, they instantly lost their brand uniqueness and became merely another Amazon product, while the e-commerce giant took a hefty 30% sales commission. Worse, said Eyal, was that retailers and customers that made use of Amazon had no idea how their data was being used. “Amazon puts you against your competitor on every sale and of course Amazon strips you of your brand and identity. When you sell on Amazon you’re just another page on Amazon.”

The presentation had turned into a dramatic battle between good and evil. Amazon was the enemy. But Shopin was here to save the day. After all, wasn’t the start-up just the kind of innovative solution retailers had long been waiting for?

But why the blockchain? For Eyal it was simple. The blockchain allows for the decentralised storage of users’ data – so that no one retailer owns the data or, at least, not all the data. This would allow retailers to share data on users with one another, and ensure that retailers were protected, as competitors would never have sight of all the data, only that which their competitors opted to share with other retailers.

However, there was one problem – speed. The blockchain, it turned out, was just too slow to run a system that involved tens of thousands of users transacting on it when it was up and running. At the time the Ethereum platform allowed for only between five and 15 transactions per second. But Shopin, claimed Eyal, had come up with a solution to this. The solution came in the form of a partnership with iExec, a blockchain-powered, cloud-computing platform. Using iExec, Shopin had created a system able to support one million transactions a second, securely. The new measure implemented by Shopin even had a catchy name – “atomic swaps”.

In the same month in an interview with a blog called Altcoin Today, Eyal explained how it would work. “Through collaboration with iExec, Shopin will run as a decentralised application on a private blockchain that interfaces with the Ethereum blockchain using atomic swaps,” he said.

“The partnership enables Shopin to scale its application to enterprise-level needs for millions of shoppers and retailers, enhance the benefits of the Ethereum blockchain without restrictions, and democratise shopper data by giving consumers full ownership and control over how, when, and where they use their preferences and purchase history data.”

All told, it seemed like a brilliant idea. And investors’ money rolled in. DM

Stephen Timm is a Cape Town­-based journalist, researcher and writer. He has written for a number of publications on the small business sector. He is the winner of the Africa SMME Award for Journalist of the Year (2005). Between 2017 and 2020 he served as editor of Ventureburn, a South African publication that covers Africa’s tech start­up sector. At Any Cost is published by Tafelberg.

Gallery

Comments - share your knowledge and experience

Please note you must be a Maverick Insider to comment. Sign up here or sign in if you are already an Insider.

Everybody has an opinion but not everyone has the knowledge and the experience to contribute meaningfully to a discussion. That’s what we want from our members. Help us learn with your expertise and insights on articles that we publish. We encourage different, respectful viewpoints to further our understanding of the world. View our comments policy here.

All Comments 1

  • Is Eran Eyal linked in any way to Nadav Eyal the well-known author selling a book promoted by the Daily Maverick shop? We should be told.

  • DM168 ANALYSIS

    ANC’s farce about Ace: By trying to suspend Ramaphosa, Magashule has played his panic card

    By Sibusiso Ngalwa

    "I feel like we should stop calling feminists 'feminists' and just start calling people who aren't feminist 'sexist' – and then everyone else is just human." ~ Maisie Williams