Can anyone vouch for this behavior being prevalent? To me it just seems like a result of psychology where people think that others have more interesting/fulfilled social lives than they do despite it not being actually true, but maybe I live under a rock.
Furthermore, there are a ton of small VCs and startups in the valley. Of course a small percentage will do sketchy stuff. This is true everywhere and would really only be a problem if it was widespread or common amongst the major players and served as a meaningful barrier to entry. The only firm mentioned by name, Binary Capital, looks like a two or a one person shop, and I assume doesn't have much market power.