O.XYZ, a blockchain and AI company touting crypto and artificial intelligence services, is facing allegations of falsely inflating its technological claims and engaging in aggressive tactics to suppress dissent within the company.

While founder Ahmad Shadid has defended both his and the company’s actions, multiple sources familiar with the company’s operations who spoke with Decrypt have refuted public claims, alleging widespread misrepresentation of O.XYZ’s capabilities.

O.XYZ positions itself as a community-owned “Super AI” ecosystem. The company claims to leverage substantial GPU computing power, purportedly deploying tens of thousands of open-source models, enabling it to execute a wide array of tasks.

Sources claim the company has exaggerated its capabilities, falsely stating it can connect to over 100,000 AI models, runs 20 times faster than competitors, and owns powerful hardware it doesn’t actually possess. 

It’s also accused of inflating the value of its satellite program and misrepresenting its token launch, raising questions about transparency and accountability.

As a result of those allegations, sources claim holders of the company’s recently launched O.XYZ token are at risk of being harmed.

In an emailed statement to Decrypt, Shadid issued a detailed response to concerns raised about the company’s claims, insisting that O.XYZ’s promotional language is “forward-looking” and aligned with its development roadmap. 

However, sources who spoke with Decrypt dispute this characterization, pointing to materials on O.XYZ’s website and investor presentations that describe capabilities as existing rather than aspirational.

In June, Shadid stepped down as CEO of Solana-based decentralized infrastructure provider IO.net—a company he founded—amid allegations surrounding his past and misreported company metrics, citing his decision as a move to reduce distractions and focus on the company’s growth.

A public statement Shadid published amid his departure from IO has since been deleted from Twitter (aka X). To avoid conflicts and distance itself from Shadid, IO agreed to offer a “six-figure severance,” one source familiar with the matter told Decrypt. IO earlier this year raised $30 million in a Series A round from notable crypto industry investors, including Hack VC, Solana Labs, Aptos Labs, Multicoin Capital, and Animoca Brands. 

Several sources who have previously worked with Shadid described him as a “smart, capable individual” who manages each and every time to assemble a highly experienced team for the job. However, both a former employee and an investor who wished not to be named stated they would “never work with Shadid again.”

Disputed infrastructure and performance claims

In response to allegations that O.XYZ is exaggerating its capabilities, Shadid highlighted the company’s investments in U.S.-based Cerebras Systems hardware and plans to deploy cutting-edge AI data centers, asserting that its infrastructure supports “20x faster” AI processing. He cited benchmarks of Cerebras WSE-3 chips as evidence of O.XYZ’s performance leap.

Sources dismissed those claims as “patently false,” instead alleging O.XYZ has yet to acquire the necessary hardware for such operations, despite Shadid’s claims of “advanced talks” with Cerebras.

“There’s no internal benchmarking supporting the 20x figure,” one source said, who noted that the company’s routing technology might actually increase latency rather than reduce it.

Misleading Starlink and partnership claims

O.XYZ has also promoted itself as being powered by SpaceX’s Starlink, with Shadid emphasizing the technology’s integration within the company’s operations. 

He further clarified that the claim refers to O.XYZ’s ongoing infrastructure roadmap, including plans for “maritime connectivity solutions” and future AI capabilities in space slated for 2026.

However, sources strongly contest that narrative. Instead, they assert Starlink is only used for basic internet connectivity in remote areas and plays no role in AI processing. 

“No satellite designs exist within the company, and there’s no engineering team capable of developing such capabilities,” one source told Decrypt. They added that there are no ongoing discussions with SpaceX, despite the impression created in marketing materials.

Shadid’s responses also addressed the display of logos from major organizations such as OpenAI and Neuralink, claiming they were used to represent contributors’ backgrounds rather than formal partnerships. 

However, sources allege that this practice misleads investors and customers, noting that contributors requested their logos be removed after leaving the company—a request that allegedly has yet to be resolved.

Controversy around token launch

The company’s O.XYZ token launch on October 15 across multiple “lesser-known” exchanges has been another flashpoint. While the token only averages around $23,000 in daily trading volume across all exchanges—with a mere $8.1 million fully diluted token supply valuation—sources say it’s only a matter of time before token holders are harmed.

“There is no way to use the token to pay for anything like API calls for the company AI, nor does the token legally entitle the holder to any assets of the company,” one of the sources said.

Shadid characterized the “initial liquidity pool activation” as occurring during a “testing phase,” which was “immediately communicated to the community.”

“After a thorough market condition analysis, we made a strategic decision to proceed with the launch rather than withdraw the liquidity, effectively advancing our planned token release timeline,” Shadid said.

He added: “This decision was communicated transparently through multiple channels, including Discord and internal communications,” he said. “While the initial activation was unplanned, our subsequent decision to maintain the token’s availability was deliberate and strategic. We maintain comprehensive documentation of all communications throughout this process, demonstrating our commitment to transparency with both our community and stakeholders.”

One former employee who did not wish to be named, for fear of reprisal, shared that they were offered financial incentives tied to a non-disclosure agreement after questioning the ethical implications of the launch. 

Another source alleged, “Shadid was testing trading algorithms when the ‘accident’ occurred.”

“Was testing my O.CAPITAL market maker quant systems, and it created a pool on Uniswap, and tokens went live by mistake,” according to a screenshot reviewed by Decrypt of a message from Shadid posted to a general Slack channel for all employees to see. “I can’t take it down.”

Secret recordings also reviewed by Decrypt appear to contradict Shadid’s explanation. Sources say the token launch was instead deliberate, and employees were told differing stories—some that it was intentional, others that it was a “mistake.”

“Totally against what the public-facing company docs would have people believe with lines of transparency and community ownership,” one source said. “Ahmad owns all the tokens effectively and can dump them at a whim.”

Allegations of retaliatory practices

Sources claim that O.XYZ has used non-disclosure agreements to suppress dissent. They described a culture of retaliation, including terminations following inquiries into the company’s operations. 

“The NDAs are being weaponized to silence legitimate concerns,” one source alleged.

Shadid defended the company’s contractor-based employment model and strict confidentiality agreements, stating these practices are standard in the industry. 

Shadid has not directly addressed the allegations of retaliation, but emphasized O.XYZ’s commitment to “clear, accurate communication” and “comprehensive documentation” of its strategic goals.

In any case, the allegations have led several former employees and contributors to seek legal counsel. Sources Decrypt spoke to say those former employees are now exploring further options to shed light on O.XYZ’s alleged practices.

Morpheus went live on a public testnet, or simulated experimental environment, in July. The project promises personal AIs, also known as “smart agents,” that can empower individuals much like personal computers and search engines did in decades past. Among other tasks, agents can “execute smart contracts, connecting to users’ Web3 wallets, DApps, and smart contracts,” the team said.

War is more profitable than peace, and AI developers are eager to capitalize by offering the U.S. Department of Defense various generative AI tools for the battlefields of the future.

The latest evidence of this trend came last week when Claude AI developer Anthropic announced that it was partnering with military contractor Palantir and Amazon Web Services (AWS) to provide U.S. intelligence and the Pentagon access to Claude 3 and 3.5.

Anthropic said Claude will give U.S. defense and intelligence agencies powerful tools for rapid data processing and analysis, allowing the military to perform faster operations.

Experts say these partnerships allow the Department of Defense to quickly adopt advanced AI technologies without needing to develop them internally.

“As with many other technologies, the commercial marketplace always moves faster and integrates more rapidly than the government can,” retired U.S. Navy Rear Admiral Chris Becker told Decrypt in an interview. “If you look at how SpaceX went from an idea to implementing a launch and recovery of a booster at sea, the government might still be considering initial design reviews in that same period.”

Becker, a former Commander of the Naval Information Warfare Systems Command, noted that integrating advanced technology initially designed for government and military purposes into public use is nothing new.

“The internet began as a defense research initiative before becoming available to the public, where it’s now a basic expectation,” Becker said.

Anthropic is only the latest AI developer to offer its technology to the U.S. government.

Following the Biden Administration’s memorandum in October on advancing U.S. leadership in AI, ChatGPT developer OpenAI expressed support for U.S. and allied efforts to develop AI aligned with “democratic values.” More recently, Meta also announced it would make its open-source Llama AI available to the Department of Defense and other U.S. agencies to support national security.

During Axios’ Future of Defense event in July, retired Army General Mark Milley noted advances in artificial intelligence and robotics will likely make AI-powered robots a larger part of future military operations.

“Ten to fifteen years from now, my guess is a third, maybe 25% to a third of the U.S. military will be robotic,” Milley said.

In anticipation of AI’s pivotal role in future conflicts, the DoD’s 2025 budget requests $143.2 billion for Research, Development, Test, and Evaluation, including $1.8 billion specifically allocated to AI and machine learning projects.

Protecting the U.S. and its allies is a priority. Still, Dr. Benjamin Harvey, CEO of AI Squared, noted that government partnerships also provide AI companies with stable revenue, early problem-solving, and a role in shaping future regulations.

“AI developers want to leverage federal government use cases as learning opportunities to understand real-world challenges unique to this sector,” Harvey told Decrypt. “This experience gives them an edge in anticipating issues that might emerge in the private sector over the next five to 10 years.

He continued: “It also positions them to proactively shape governance, compliance policies, and procedures, helping them stay ahead of the curve in policy development and regulatory alignment.”

Harvey, who previously served as chief of operations data science for the U.S. National Security Agency, also said another reason developers look to make deals with government entities is to establish themselves as essential to the government’s growing AI needs.

With billions of dollars earmarked for AI and machine learning, the Pentagon is investing heavily in advancing America’s military capabilities, aiming to use the rapid development of AI technologies to its advantage.

While the public may envision AI’s role in the military as involving autonomous, weaponized robots advancing across futuristic battlefields, experts say that the reality is far less dramatic and more focused on data.

“In the military context, we’re mostly seeing highly advanced autonomy and elements of classical machine learning, where machines aid in decision-making, but this does not typically involve decisions to release weapons,” Kratos Defense President of Unmanned Systems Division, Steve Finley, told Decrypt. “AI substantially accelerates data collection and analysis to form decisions and conclusions.”

Founded in 1994, San Diego-based Kratos Defense has partnered extensively with the U.S. military, particularly the Air Force and Marines, to develop advanced unmanned systems like the Valkyrie fighter jet. According to Finley, keeping humans in the decision-making loop is critical to preventing the feared “Terminator” scenario from taking place.

“If a weapon is involved or a maneuver risks human life, a human decision-maker is always in the loop,” Finley said. “There’s always a safeguard—a ‘stop’ or ‘hold’—for any weapon release or critical maneuver.”

Despite how far generative AI has come since the launch of ChatGPT, experts, including author and scientist Gary Marcus, say current limitations of AI models put the real effectiveness of the technology in doubt.

“Businesses have found that large language models are not particularly reliable,” Marcus told Decrypt. “They hallucinate, make boneheaded mistakes, and that limits their real applicability. You would not want something that hallucinates to be plotting your military strategy.”

Known for critiquing overhyped AI claims, Marcus is a cognitive scientist, AI researcher, and author of six books on artificial intelligence. In regards to the dreaded “Terminator” scenario, and echoing Kratos Defense’s executive, Marcus also emphasized that fully autonomous robots powered by AI would be a mistake.

“It would be stupid to hook them up for warfare without humans in the loop, especially considering their current clear lack of reliability,” Marcus said. “It concerns me that many people have been seduced by these kinds of AI systems and not come to grips with the reality of their reliability.”

As Marcus explained, many in the AI field hold the belief that simply feeding AI systems more data and computational power would continually enhance their capabilities—a notion he described as a “fantasy.”

“In the last weeks, there have been rumors from multiple companies that the so-called scaling laws have run out, and there’s a period of diminishing returns,” Marcus added. “So I don’t think the military should realistically expect that all these problems are going to be solved. These systems probably aren’t going to be reliable, and you don’t want to be using unreliable systems in war.”

Edited by Josh Quittner and Sebastian Sinclair