Why should there be a separation? If the startups using their product wouldn't have survived on their own or found other investors injecting as much money, that's a huge sign of circular economy.

Why would their be a separation between fraud and normal business?

I mean, the examples you brought are all a bit fraud.

It's all fraud.

At best, financing like that means any honest competitor that doesn't get on the honey train is at massive market disadvantage.

Kinda similar to when niche gets flooded by VC money. Now anyone with better product will get out-competed by people that can sell at cost or below it because they can ride the VC honey train till the competitors are extinct and they have captured the market