Quantum computing startup IonQ is facing a securities fraud lawsuit after a barrage of allegations came to light in a searing report from Scorpion Capital, which purported to show that the company lied about the maturity (and even existence) ) of his quantum device, in addition to a handful of alleged financial fictions.
Scorpion Capital’s report, published on May 3, provides a rigorously scathing assessment of IonQ technology, which is described as “a worthless toy that can’t even add 1+1” as assessed by internal experiments conducted by numerous quantum experts. unidentified but hired. by Scorpion and extensively detailed in the full report [PDF].
It’s not just the company’s technology that’s in the spotlight, either. Scorpion Capital calls the startup “a part-time side job run by two academics,” one of whom, CEO and founder Peter Chapman, “appears to be fabricating his educational credentials from MIT,” something to which We’ll be there in a moment.
According to the class action notice Los Angeles-based Glancy Prongay & Murray, which is aimed at those who invested in IonQ securities between March 30, 2021 and May 2, 2022, there are a number of alleged misrepresentations and omissions in the company’s documents. SEC and other companies, as well as in IonQ’s website and marketing documents.
The first and most damning is the claim that “IonQ had not yet developed a 32-qubit quantum computer” and that their “existing 11-qubit quantum computer suffered from significant error rates, rendering it useless.”
In addition to claiming that the flagship 32-bit quantum computer never existed and that the tiny one they had was so error-prone, even though it was “not accessible despite being available through major cloud providers,” the The lawsuit also alleges some financial misdeeds, including the claim that “a significant portion of IonQ’s revenue was derived from improper back-and-forth transactions with related parties.”
Colloquially, Scorpion Capital adds that “IonQ’s main holders are some of the usual SPAC junk providers” and, without disguising distaste, Scorpion adds that “no charade is complete without Softbank appearing as one of the main holders, and it seems that silver lake, google and the family office of michael dell have also been duped we also saw the appearance of the CEO of Quantumscape (QS) on the IonQ advisory board we published a report on that SPAC last year which has gone down 61 percent. since.”
Haters gonna hate…
All of this sounds damning, to be sure, but we must urge some caution beyond the obvious (these are accusations). Scorpion Capital is run by what appears to be one person, Kir Kahlon, who is solely focused on finding and reporting fraudulent securities.
A noted short seller with a declared MBA from Harvard, Kahlon has worked for several top-tier investment firms, including Tiger Global, Seligman Investments, and Bain & Co., and also founded “an enterprise software company” where he raised $ 15 million in capital (notice how he technology is not important, but fundraising is).
We reached out to Kahlon for feedback and to learn more about her business software company and experiences working with the companies listed on her LinkedIn profile, as there is no record we could find of these experiences or company affiliations. at the time of writing this article. .
In that vein, IonQ addresses Kahlon and common short selling techniques in his public statement following the report: “As the first public ‘pure gaming’ quantum company, IonQ is an easy target for questionable stock manipulation tactics, such as publishing misinformation and betting against the company through a short-selling strategy.” “.
IonQ CTO Jungsang Kim and Chief Scientist Christopher Monroe added: “The report is riddled with misinformation, demonstrating shocking ignorance of the quantum computing industry in general and IonQ technology in particular.” However, the disclosure page is clear: it admits that Scorpion has a financial incentive to devalue IonQ, does not guarantee the accuracy of any of the report’s content, and acknowledges editing interviews with paid experts and former employees while suppressing positive reviews of IonQ. “.
For reference, there are many references to the work of Duke University professor Dr. Jungsang Kim and its chief scientist, Christopher Monroe from the University of Maryland and his years of work in the field of quantum computing. This contrasts sharply with the lack of public information about the extraordinary short seller, Kir Kahlon. It’s the fact that these two academics are holding down “real jobs” that leads Khalon to claim it’s a “side hustle.”
The only “gotcha” worth noting concerns the company’s CEO and his claim to fame at MIT. Scorpion Capital notes that CEO Peter Chapman’s narrative is that he is a “whiz kid who started programming at MIT’s Artificial Laboratory at age 16,” but that this was pre-adult experience and not a college degree. degree.
As the Scorpion report puts it: “Far from being a child prodigy, we suspect his alleged job at MIT at age 16 was simply nepotism. Chapman has stated that his father was an astronaut, who we believe to be Philip Chapman, whose profile Wikipedia says yes. his Ph.D. at MIT in the 1960s and then appears to have remained in the Cambridge/Boston research scene We note that Peter Chapman’s profile on the IonQ site and in SEC filings not only does not include MIT, instead, it does not list any educational credentials. “
We reached out to Chapman for comment and clarification.
But here’s why you’re reading this to begin with…
The reason this story matters is because it (all too easily) gives you what you wanted: a jagged takedown of a technology that’s so hard to describe and compare that it’s ripe territory for actual fraud.
The Scorpion report addresses solid savagery for what it calls a “quantum Ponzi scheme” and “blatant deception.” For those in the business world, as we are, it is clear that this report, which is far from being an arid academic evaluation of performance and claims, is intended to feel something. And after all, isn’t that what guides investment decision-making when hard data is scarce?
From the report: IonQ’s tactics are “reminiscent of Nikola’s antics, our research indicates that IonQ’s purported 32-qubit “world’s most powerful quantum computer” is a blatant hoax. The machine appears near the top of his home page and is their claim to fame as well as the basis of their SPAC We believe that IonQ’s only real machine is a useless, experimental, buggy toy with far fewer qubits, similar to science projects one might use for free from your competitors.
It would be silly to say that there is not a general appetite for takedowns of quantum technology companies providing meaty details and rabid attack language. After all, in the real world, the one we all knew in the boring old days of CMOS, you had to prove that what you did worked. How dare these upstarts walk away with millions in funding to develop something that is Schrödinger’s stray cat: both real (funded/employing people) and dead (because it never materializes in the real world)? ®