hile the cryptocurrency space is still in its infancy, in many ways, this is still the Far West out there. Some think that the financial rules don’t apply to this new asset category. Fraud attempts are referred merely as “FUD” (Fear Uncertainty and Doubt) and suddenly, the once-known as corrupt Wall Street world seems like peanuts compared to what’s happening in the crypto space.
Because the cryptocurrency world is merely at its beginning, manipulating prices is not very hard. And we are being told that someone tried to do just that. On July 18, the story broke on social media. Someone tried to manipulate the price of the cryptocurrency Chainlink, by shorting it before releasing a negative paper about it. But the story doesn't end there, a link was found between the fintech company Nexo and Zeus Capital, who released that paper. Was it a mistake or an attempt to frame Nexo?
In this fake news world of social media, we decided to make our own investigation and show you the facts and only the facts. And before we start, some might want to call this article as “FUD” – we promise you that we couldn’t care less about FUD, FOMO or any other immature acronyms from the crypto world. We’ll stick to the facts.
FACT #1: Nexo adds Chainlink on July 8, 2020
On July 8, 2020, Nexo announced on their official blog the addition of ChainLink to their platform. “As a part of the dynamic expansion of Nexo’s products, we have added LINK as an available asset for the Instant Crypto Credit LinesTM and Earn on Crypto.”
FACT #2: Nexo announces a partnership with Chainlink on July 8, 2020
On that same day, Nexo announced the following partnership with Chainlink: “Nexo, the market-leading crypto lender, and Chainlink, the most used and secure decentralized oracle network in the blockchain ecosystem, are forming a collaboration that would integrate Chainlink into Nexo’s lending and trading operations. Chainlink will contribute to the decentralization of Nexo’s lending, OTC, and institutional capabilities as Nexo builds out a complete prime brokerage product suite.”
Later, on that same joint statement: “Nexo’s mission is to bridge the gap between digital and traditional finance and our developing collaboration with Chainlink brings us a step closer to achieving this. We are very much on the same page — both in terms of how our respective services currently align, and in terms of our shared vision for a digital, decentralized future of finance. We’re thrilled to have them on board.”
FACT #3: 350,000 LINKs have been transferred from Aave to Nexo on July 14, 2020 (10:14:52am UTC)
Transaction hash: 0x54ddcd45dafedd741cd82b81ee42b45c5c929916777982c2687931ad767d4161
FACT #4: Zeus Capital uploads a report on Chainlink on July 16, 2020
On July 16, a mysterious company called Zeus Capital released a report on the cryptocurrency Chainlink. The title says it all. “The Chainlink Fraud Exposed: An Investigative Report on Why Chainlink is the Crypto’s Wirecard.” The report is not subtle. In the author’s view, Chainlink is worth $0.
Here is the link to the report:
We verified ourselves. The infamous report was uploaded on July 16, 2020, at 10:32am (hour of the server):
FACT #5: Capital Zeus Website was only used for this report
But most importantly, we analyzed the files from the Capital Zeus hosting server and were able to find that pictures containing elements on the Chainlink report were uploaded on July 15, 2020 – one day prior to the release of the report and only one day after the short position.
FACT #6: Simeon’s name found in the source code of the PDF report
The Twitter member _WhenMoon_
has discovered that there was a broken inside link inside the PDF report. The link referred to a Microsoft Windows path in a folder with the name “Simeon”.
Many draw a link with Simeon Rusanov, the head of Digital Assets Research at Nexo, as you can see from his official Linkedin account with more than 500 connections:
During our investigation, we discovered that Rusanov has a Medium page, on which 3 out of 3 highlighted posts are related to Chainlink:
We then discovered that Mr. Rusanov has written 37 articles on Seeking Alpha, a professional site on Finance. Here is his profile page:
While it is easy to create a fake company site, we believe it is far more complex to hide your true self when writing. British author Virginia Woolf said that “every secret of a writer’s soul, every experience of his life, every quality of his mind, is written large in his works.” You cannot hide from your own writing. So we spent hours and manually analyzed and compared the PDF report with the articles from Mr. Rusanov. What we found were striking similarities in not only the writing style but in the usage of some words such as starting sentences with “Considering”, the countless usage of the word “However”. And the peculiar way he has to use a slash to share two common words, as well as the usage of the semi-colon or using the word “farce” when talking about a financial project.
But we went a step further and asked one of our developers to use a Stylometry study developed in Python. While this is no proof, by looking at the results, we also concluded that there is a statistically relevant chance that Mr. Rusanov is the author of the Zeus Capital paper.
Ultimately, the analysis is just that, an analysis. And this is only one element and a very subjective one that proves nothing. To be crystal clear, Mr. Rusanov has not been charged with any crime at this moment in time.
FACT #7: A Typeform link going to Nexo has been found on Zeus-Capital.com
Dan, an administrator from Nexo's Telegram channel shared the following:
"The Typeform in question (now taken down from the “fund” website) is indeed Nexo's and during the past years has been used on thousands of occasions by our team for all kinds of marketing purposes to collect emails on various landing pages from consenting users. The form's code and URL were accessible by anyone and they could have been copied and pasted by any of its millions of recipients or visitors.”
FACT #8: Some Nexo members received an email from Zeus Capital with the report
Some Nexo members received this email from Zeus Capital. Thank you to John Brown (nickname) for the screenshots of that email done especially for The Financer.
Gluke78 (@Gluke781) reported the same:
Spyros (@GinisAlexander) too:
Is shorting and distorting a crime?
This is the description of short and distort from Investopedia:
“Short and distort refers to an unethical and illegal practice that involves investors shorting a stock and then spreading rumors in an attempt to drive down its price. Such a practice, most often employed by stock manipulators who trade daily via the internet, involves the spread of unsubstantiated rumors and other kinds of unverified negative news designed to help them realized a profit on their short position.
Short and distort can be contrasted with a pump and dump scheme, whereby the perpetrator takes a long position and then spreads misinformation to drive the stock price up. (…) In one example of short and distort in 2008, Wall Street trader Paul S. Berliner was charged with securities fraud and market manipulation for having spread false rumors about the acquisition of Alliance Data Systems (ADS) by The Blackstone Group while shorting ADS. He utilized instant messaging to individual investors, traders at brokerage firms and hedge funds to spread his negative message about the deal. His false statements were also picked up by the media. Berliner settled the charges by paying a $130,000 penalty, disgorging over $26,000 in profits and being barred from associating with any broker or dealer by the Securities and Exchange Commission (SEC).”
Who is behind Zeus Capital?
We contacted Zeus Capital but no one replied to their phone line. We then wrote to them on social media and received the following response:
“Why would we talk to a media of this low competence, no significance, while also making unsubstantiated allegations?”
While we will not comment the insults, these types of answers only reaffirm our view that Zeus Capital is far from being a real company. No serious investment firm would show that type of immature behavior when asked about market manipulation. In many ways, this discredits their earlier work: spending hours creating a dedicated Website and writing a 59-page long in-depth report comparing an asset to Wirecard, only to then rage on social media in order to try to make their point come across.
What is even more ironic is that they are calling Chainlink a fraud, but when some call them a fraud, they received insults. Double standard?
Still, we kept asking until they agreed to answer to our questions. Please find below the answers from the CEO of Zeus Capital, David Baumann, which we provide word for word:
Who wrote the report on Chainlink?
The Zeus Capital Team. It consists of researchers and traders distributed throughout the world but united by their common belief that the crypto market space needs people who are willing to take the unpopular view to expose fraud wherever we see it.
Right now the biggest pump-and-dump in the space is Chainlink, as exposed by our report. Chainlink is the only top 20 coin that is an ERC 20 token (apart from Tether which is a stablecoin) and so it runs on a testnet. Marines would try to fool you by saying it is on the Ethereum mainnet but that is the exact problem - it is a second layer protocol, a glorified Ethereum DAPP at best. This is seriously disturbing, as Chainlink lacking a mainnet / own blockchain makes it a beta product with a multibillion-dollar market cap, based solely on partnership announcements and pyramid community promotions with no technology behind it.
How do you explain that the first name Simeon appeared in the source code of the PDF report?
I will not allow the attention to be shifted from the findings of the report - we are talking about a massive fraud which is going to devastate financial a lot of mostly young kids, led by the pied piper Sergey Nazarov. People's lives are being ruined and you are trying to switch the narrative here with irrelevant details.
Did Simeon Rusanov, an employee of Nexo, wrote the report?
We made an in-depth analysis of the Chainlink report and cross-referenced with many writings of Simeon Rusanov, especially from
his material on seekingalpha.com. We believe that Mr. Rusanov is the author, as there are some words that he writes in a peculiar way as well as some syntax that is precisely the same. How do you explain that?
Irrelevant to the substance of the report which uncovers the Wirecard of crypto. You're shifting the focus.
350,000 LINK were borrowed on Aave and sent to Binance on July 14. On July 15, some picture elements of the report appeared on
your Website and on July 16 your report was published. How do you explain the coincidence?
I do not need to explain anything - we have seen that Chainlink is a gigantic fraud and has taken a short position and we have disclosed that with the sending or the report.
See how investor activism works in the traditional markets and understand that short selling is an essential part of an efficient market. Bubbles and pump-and-dumps prosper from lack of checks and balances.
Who is the CEO of Zeus Capital and who founded the company?
How many employees work for Zeus Capital?
Did anyone linked to Zeus Capital shorted Chainlink?
Of course, we put our money where our mouth is - we have been very transparent about this point from the beginning. We are short and continuing to short LINK. A lot of people who suspected Chainlink to be fraud are now reinforced by our report and investors and institutions are building up massive short positions.
How do you explain that the Typeform link of Nexo ended up on your official site?
You are again trying to shift the attention away from the report and its findings, please focus on that and not on gossip.
Do you have any relationship with Nexo?
Irrelevant to the findings of the report.
Many members from Nexo received your email with the Chainlink report, how do you explain that?
We are happy that the report has reached millions of people.
Are you working on a new report at the moment? If so, when can we expect to see a new report?
Indeed, we are working on several reports at the moment. We are only getting started, the crypto markets need to be cleaned up from fraudulent projects which are numerous and need to be exposed.
Antoni Trenchev, CEO of Nexo
Following the accusations, we contacted Mr. Antoni Trenchev, CEO of Nexo, who took the time to reply to us and give us some of his comments on the accusations.
“The facts so far lead us to believe that the whole case is truly an elaborated and well coordinated attack against Chainlink, Nexo, and the entire blockchain space.
In our determination to get to the bottom of this, Nexo and Chainlink are hiring a professional forensics team to do a deep dive and help us accurately assess the situation, as asserted by our respective official statements (which The Financer has assured us have been thoroughly examined, here is Chainlink’s once again).
Until the finalization of the investigation, we would like to refrain from commenting on specifics as this might obstruct the process.
Simeon Rusanov is in voluntary time off until the investigation is completed. Thus far he has been most cooperative and we believe in the principles of every free society - innocent until proven guilty.
He has already confirmed that should there be any trace of wrongdoing, he will leave the company and face the consequences. He maintains his innocence and we give him the benefit of the doubt as we are not in the habit of quickly jumping to conclusions.
On a related note, apart from someone taking a short position in LINK, we have reason to believe the same is true of the NEXO Token and this would explain quite a lot. Also, we are paying out a dividend on August 15, 2020, and in the past, we have seen attempts by market manipulators to bring down the NEXO Token in order to buy it on the cheap.
Ultimately, this opaque attack is on the entire space and we are determined to fight it off, sure that we will collectively emerge stronger than ever before.”
While the story keeps unfolding, there seems to be three possible scenarios. Someone tried to frame Nexo by trying to link their company to the Zeus Capital story. Simeon did indeed produce the report but without Nexo being aware of it. Or Nexo employees are behind Zeus Capital and got caught. But whatever the scenario, we can only confirm that the impact on both the NEXO and Chainlink tokens has been insignificant. If there was any attempt to manipulate the market, it clearly failed and backfired.
We’ll continue to cover the story as more elements come to light. We use this opportunity to thank both Mr. Trenchev and Zeus Capital for having taken the time to reply to us in such short notice. Meanwhile, Mr. Rusanov did not respond to our messages.