Recently (July 16th, 2020), there was a report published by investment banking firm, 'Zeus Capital' titled:
'The Chainlink Fraud Exposed'
This caught our attention since we aren't used to seeing such surprisingly aggressive-worded market reports for projects in the blockchain space (or elsewhere for that matter).
Reviewing the Market Report
The report, which will be covered in this piece, can be found here at this link:
Quick Summary of the Report
The report iterates a few negative allegations that we've heard leveled against Chainlink in the past.
Based on the research that we have performed on our end (at Librehash), we can corroborate the assertions made in the market report by 'Zeus Capital'.
Validating the Claims By Zeus Capital
For whatever reason (perhaps due to time constraints or apathy), Zeus Capital did not shell out their allegations in greater depth (they simply stated their observations and made a few finite claims about the project).
Failing to do so means that the eventual pushback by the Chainlink community will be that every claim in the report is simply 'FUD', which will quickly devolve into a game of, "Who do you believe more?"
We Will Remove All Doubt
Cutting to the chase, this report will cover the following:
- A brief overview of the claims made by 'Zeus Capital'.
- The veracity of each claim
- A separate section providing concrete evidence and research to back up each one of those claims
- Additional information about Chainlink that we've discovered that further supports and reinforces the idea that the project is more than likely vaporware.
- Probing into the shady offshore company creation underpinning Chainlink's legal entities
- Breaking down the plausibility and legitimacy of Chainlink's premise as a blockchain project.
There's a lot to get to here - so let's not waste any time.
Assessing the Market Report By 'Zeus Capital'
Again, for reference the link to this market report can be found here:
Who is 'Zeus Capital'?
Cursory research shows that they might be an 'Investment Bank'. Chances are they aren't (it actually appears that this entity has fraudulent / illegitimate origins).
Below is a screenshot from their website for reference:
And below is another screenshot of the company's profile by Bloomberg:
To be clear, this entity above is not the same entity as the one that published the report about Chainlink ($LINK).
What's the Relevance of Zeus Capital in Blockchain?
Great question, because we had never heard of them before they published (what many are considering) a bombshell report on Chainlink.
In the following sections, we do a bit of digging on them - but as you'll come to find out - the real answer here (re: relevance) is that they have none because they don't exist in this sphere.
Searching For Connections Between Zeus Capital and Blockchain
Surprisingly, there aren't many.
We say this is surprising because, for the firm to write such a harshly-worded rebuke of Chainlink, we assumed that they must be deeply embedded in the space to the extent where they would have a reason to be concerned about Chainlink's legitimacy as a project.
Why This is Important
Despite us stating in the introduction of this report that we agree with many of Zeus Capital's allegations (based on research that we have already independently conducted re: Chainlink), it is still worth examining the background of spontaneously arriving actors in the blockchain space.
Especially when those actors appear to have strong qualms with one specific project (out of the many that are worthy of criticism in the blockchain space).
Likelihood That the Firm's Origins Are Illegitimate
Further research shows a likelihood that this 'firm' is spoofing the actual 'Zeus Capital' by:
- Claiming to be in the same location
- Putting up a website that's at the same domain as the actual U.K. firm (just a letter off)
- Claiming to offer the exact same financial services as the real Zeus Capital
- Even branding / theming their website and market report with the same colors used by the real Zeus Capital U.K. firm
HyperQuant Project Connection
One definitive tie to the blockchain space we were able to find was an article (published on Medium circa April 2018) announcing a partnership between 'HyperQuant' and 'Zeus Capital' (see below):
Festering Out Information About 'HyperQuant'
Below is a screenshot from 'CryptoSlate' showing the current market metrics for the project:
Oddly, it appears that the project has made zero headway since its inception in 2017 (three years ago).
The location of the listed team members (Estonia) is worth noting as well:
Scant Additional Information on 'Zeus Capital'
Apart from what was detailed above, we were unable to find any additional information worthy of note regarding Zeus Capital and their involvement in the blockchain space - which makes their market report declaring Chainlink to be a "fraud" a bit out of left field, but we'll have to take it for what it is (for the time being).
Evaluating the Zeus Capital Report on Chainlink
The report's cover page starts off with a pretty strong declaration, forecasting the price of $LINK to fall all the way to just 7 cents (its currently trading north of $8 at the time of writing):
Reviewing the Executive Summary
Below are screenshots from the market report's 'executive summary', which details its qualms with Chainlink:
Unpacking Each One of the Claims Made by Zeus Capital
Since the entire report is 59 pages long, we'll spare everyone the trouble of going through the entire report (again, this is a considerable effort that this firm leveraged into this market report lambasting Chainlink, for whatever reason).
Don't worry though, you aren't missing out because we took the time to read the report entirely (before proceeding with this follow-up piece).
The full market report merely covers each one of the allegations made in the executive summary in greater depth. Again, the link is posted above for anyone that wishes to go peruse the document for themselves.
From this point moving forward in the paper, we will evaluate each one of the allegations made against Chainlink by Zeus Capital, one by one (fun, fun!).
Allegation Number One: 'Chainlink is a Pump and Dump Scheme'
Specifically, the report claims:
"There is abundant evidence of market manipulation with traits of classic 'pump and dump' techniques such as trading on inside information, front-running the general public, unsubstantiated claims of progress, artificial transactions to imitate adoption, bogus partnerships announcements - and any other trick in the book to drive up the price prior to dumping LINK onto innocent investors."
Woa, that's a lot! But we can unpack it.
Taking a Look at Chainlink's Recent Appreciation in Price
In terms of the allegation that Chainlink is merely the byproduct of one large pump and dump...that cant be affirmed one way or the other.
However, the extreme rise in Chainlink's price over the last week cannot be ignore.
Take a look at the chart below:
As shown in our chart of Chainlink's exchange rate, the project appreciated by +84.34% in just a little over a week (9 days).
These gains are obviously preposterous - yielding credence to the idea that there is significant pump and dump activity coming from the 'Chainlink' camp.
But Does That Mean That the Team Orchestrated the Pump and Dumps?
This claim is really hard to prove, but...there may be proof.
Substantial Truth to the Idea Chainlink is Pedaling Bogus Partnerships to Fuel Mania
In lieu of Chainlink's recent astronomical price action (i.e., +80% in a little over a week), there were several theories posited by numerous mainstream crypto media outlets.
Specifically, we're going to take a look at this one by CoinTelegraph: https://cointelegraph.com/news/chainlink-link-surges-395-to-a-new-all-time-high-heres-why
In the article, CoinTelegraph attributes Chainlink's unreal price gains to their "new high profile partnerships".
And here is where we start stumbling across the red flags for Chainlink, for a few reasons:
A) NEXO is an indisputable scam that has no standing or respect in any notable corners of the blockchain space (despite how pervasive their ad campaign is)
B) Putting NEXO's absolutely horrendous reputation in the blockchain space aside - there is certainly no reason in mankind to propose that a "partnership" with NEXO would encourage such exuberance that users would rush to buy up Chainlink at an 80%+ premium over the course of just one week.
Evidence That NEXO is a Scam
The evidence is piled so high for NEXO that a simple "NEXO Scam" Google search will provide one with endless results (literally).
Perhaps the most notable result for those in the blockchain space is an article published recently by CoinDesk (April 2020), in which they absolutely blast NEXO is a malicious, fraudulent entity worth steering clear of at all costs.
Here's the link to that article if you're looking nfor a good read: https://www.coindesk.com/how-imposters-scam-entrepreneurs-out-of-their-crypto
Gist of the CoinDesk Article
Essentially, the journalist that published the article detailed their experience tracking down a 'scammer' in the blockchain space that had impersonated a member of CoinDesk's staff to offer the service of writing a promotional (under the table) article about the target's blockchain project / business endeavor.
Of course, since the scammer was not actually a writer for CoinDesk, any funds sent to them for the sake of fulfilling said task would be as good as gone.
Turns out NEXO was behind the scam the entire time.
And as if that isn't enough, they attempted to scam the CoinDesk reporter as he was following up to perform due diligence on the original scam perpetrated by NEXO (by proxy, claiming to be a reporter for...CoinDesk).
Other Reports Detailing NEXO's Fraud
NEXO Also Takes Credit for Chainlink's Meteoric Rise
Check out this tweet below by NEXO where they claim that their partnership with Chainlink was most likely the reason for the project's astronomical price gain:
Covered in the Next Few Parts: 'Chainlink Founders Constantly Selling $LINK ; Dumping On Their Userbase in an Apparent Exit Scheme'
Specifically, the report states that:
"The two founders behind Chainlink, are constantly selling LINK form their vast reserves at the market, as well as at a substantial discount from the current price to selected institutions over-the-counter (OTC), thus incentivizing purchasers to lock in profits by quickly selling it further, creating a downward spiral."
Moving forward, we're going to evaluate whether or not this claim is true or false.