Quantum computing startup IonQ faces a lawsuit over securities fraud after a barrage of allegations came to light in a blistering report from Scorpion Capital, alleging the company lied about its maturity (and even existence). van) his quantum device, in addition to a few claimed financial fictions.
The Scorpion Capital report, issued May 3, offers a rigorously damning assessment of the IonQ technology, which is described as “a useless toy that can’t even add 1+1” as judged by internal experiments conducted by unnamed but numerous quantum experts hired by Scorpion and described in detail in the full report [PDF]†
It’s not just the company’s technology on the chopping block. Scorpion Capital calls the startup “a part-time side job run by two academics,” one of whom, CEO and founder, Peter Chapman, “seems to be making up his MIT education credentials,” something we’ll get to in a moment.
Today, Los Angeles-based law firm Glancy Prongay & Murray announced it has submitted a proposal class action complaint against IonQ, based on and referring to the allegations of the Scorpion report. The lawsuit is intended to represent those who invested in IonQ securities between March 30, 2021 and May 2, 2022. The complaint also includes a number of alleged misrepresentations and omissions in SEC and other company files, as well as in marketing and website documents issued by publicly traded company IonQ.
IonQ’s stock price fell nine percent after the publication of the Scorpion report and is down about 30 percent in the past month.
The first and most damning are the lawsuit allegations that, as the law firm summarized, “IonQ had not yet developed a 32-qubit quantum computer” and that their existing “11-quantum qubit computer suffered from significant error rates rendering it useless.” became.”
In addition to the fact that the flagship 32-bit quantum computer never existed and the small one they had was so error-prone, and the technology “was inaccessible despite being available through major cloud providers,” the lawsuit also alleges. some financial misdeeds, including a claim that “a significant portion of IonQ’s revenues were derived from improper round-tripping related party transactions.”
Informally, Scorpion Capital added that “IonQ’s top holders are some of the usual suppliers of SPAC garbage” and without disguise for disgust, Scorpion adds that “no charade is complete without Softbank showing up as a top holder, and the seems that Silver Lake, Google and Michael Dell’s family office have also been tricked.We further note that the CEO of Quantumscape (QS) has appeared on the advisory board of IonQ. We published a report on that SPAC last year , which is down 61 percent since.”
Haters are going to hate…
This all sounds damning, of course, but we must urge some caution: these are accusations.
Scorpion Capital is run by Kir Kahlon, who focuses solely on finding and recalling what he sees as fraudulent securities. A noted short-seller with a listed Harvard MBA, Kahlon has worked for a number of leading investment firms, including Tiger Global, Seligman Investments and Bain & Co, and has also founded “an enterprise software company” where he has $15 million in capital, according to his LinkedIn. We have contacted Kahlon for comment.
IonQ covers Kahlon and common short-selling techniques in its public statement according to the report, “As the first publicly-owned pure-play 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’s CTO Jungsang Kim, and lead scientist Christopher Monroe, added: “The report is full of misinformation, demonstrating a breathtaking 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 vouch for the accuracy of the report’s content, and acknowledges editing interviews with paid experts and former employees while suppressing positive opinions about IonQ.”
Scorpion has a financial incentive to devalue IonQ, it does not guarantee the correctness of the content of the report
We can find many references to the work of Dr Kima professor at Duke University, and monroe from the University of Maryland, and their years of work in the field of quantum computers. This is in stark contrast to the lack of public information about the extraordinarily shortseller Kir Kahlon. It’s the fact that these two academics keep “real jobs” that makes Khalon argue that IonQ is an “afterthought.”
Speaking of concerns about the company’s CEO and his claim to MIT fame, Scorpion Capital said Chapman’s story is that he is a “prodigy who started programming at the MIT Artificial Laboratory at the age of 16.” but that this was a pre-adult experience. and no degree.
As the Scorpion report reads: “Instead of being a child prodigy, we suspect his alleged performance at MIT at age 16 was just cronyism. He received his PhD at MIT in the 1960s and then appears in the Cambridge research world. /Boston. We note that Peter Chapman’s profile on the IonQ site and in SEC filings not only doesn’t mention MIT, but also doesn’t mention any education credentials at all.”
We have 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 (too easily) gives you what you wanted: a toothless breakdown of a technology so difficult to describe and compare that it is ripe ground for actual fraud.
The Scorpion report covers some solid ferocity for what it calls a “quantum Ponzi scheme” and a “brutal hoax.” For those who are in the words businesslike, as we are, it is clear that this report, far from being a dry academic assessment of achievements and claims, is intended to to feel something. And isn’t that the guiding principle when making investment decisions when real data is scarce?
From the report: IonQ’s tactics “reminiscent of Nikola’s shenanigans, our investigation indicates that IonQ’s alleged 32-qubit “the world’s most powerful quantum computer” is a brutal hoax. The machine is at the top of the homepage and is its claim to fame as well as its foundation of its SPAC. We believe that IonQ’s one and only machine is a useless, experimental, error-prone toy with far fewer qubits, comparable to scientific projects that you can use for free from its competitors.”
It would be foolish to say that there is no general need for demotions from quantum tech companies that yield meaty detail and rabid attack language. After all, in the real world – the one we all knew in the boring old CMOS days – you had to prove that what you were doing worked. How dare these upstarts run away with millions in funding to develop something that is a wandering Schrödinger’s cat: both real (funded/employed people) and dead (because it never materializes in the real world).