The underlying concern is one that applies to people not represented here in numbers that are significant enough to determine whether or not the problem exists in the first place. If a VC wishes to fund a company by someone they're already associated with that's entirely within their right and their responsibilities are not where the OP wishes them to be. That's why I really don't think this is relevant, regardless of whether or not such conflicts of interest exist. If they exist it is the duty of the providers of capital to insist on proper resolution procedures, for the rest of the world it is much simpler: don't engage in relationships with VCs that you feel are not ethical.

There's this myth that VCs are evil and out to devour young and fragile start-ups. Maybe it's due to the nature of my work (and quite possibly due to who pays me so there's my conflict of interest) but I've seen more start-ups and later stage companies trying to scam VCs than that I've seen VCs trying to scam/rip off (potential) port-folio companies (0).

Maybe this is a local affair and the EU VC scene is different in this respect, there is some confusion in this thread about angel investors being mixed up with VCs but in general VCs tend to be fairly honorable people. To balance that a bit more: there are VCs that have a bad reputation, typically these are smaller funds that are non-transparent wrt the source and destination of their capital, those are probably best avoided but I don't think they're representative of the segment as a whole.

The example given here - as far as I'm concerned - is a fairly typical affair given that capital providers will part with their money more easily when there is a basis of trust between them and the person or entity receiving the capital. Whether that's an optimal allocation strategy or not is debatable but it does not in any way require the measures advocated for in the article.