And that's perfectly fine, as long as the people paying the price (here, VCs) are the ones bearing the responsibility for their eventual losses.

It only gets disgusting when such "musical chairs" scams get too popular, becoming "too big to fail". Then the society at large will cover the bill, including those actors who were more prudent and honest throughout (adding insult to their injury).

The more involved and indirect the chain of responsibility, the larger the potential for scams.