I personally know some of the people mentioned in the paper and who worked for many years on these aspects of fundamental Quantum Mechanics and Particle Physics. Without discussing the details of the theory proposed in this paper, I think that some comments can be useful since I worked in research in theoretical physics for a good part of my life.
It is true that the Bell’s inequalities and the EPR paradox have been and are the cause of many debates in fundamental theoretical physics, beginning with Einstein’s reject of these concepts. I believe that today there is enough experimental evidence that on this point Einstein was wrong and the Bell’s inequalities are violated. In other words, I believe that Quantum Mechanics is a valid description of elementary physics at the Quantum scale. We know very well that (non-relativistic) Quantum Mechanics does not work eg. at very high energy scales like the ones probed by the CERN experiments which led recently to the discover of the Higgs particle.
We know very well that there is a lot that we do not understand yet in Particle Physics. This could mean that Quantum Computing could be harder than what we expect due to our ignorance of some new (quantum) physics.
But I disagree with Ross Anderson this time since I do not believe that Classical Mechanics can explain this kind of phenomena nor that it can show that the theory of Quantum Cryptography is flawed (implementing Quantum Cryptography in practice is a completely different story).