Founded in 2011, SoFi Technologies, Inc. (Nasdaq: SOFI) is an American fintech company that operates as a nationally chartered online bank. It offers personal loans, student loans, auto loans, and credit cards.
The social finance firm went public through a merger with Social Capital Hedosophia Holdings Corp. V, a special-purpose acquisition company (SPAC) backed by the billionaire Chamath Palihapitiya, in 2021.
In November last year, it became the first nationally chartered bank in the U.S. to launch cryptocurrency trading for retail customers. The service allows users to trade cryptocurrencies like Bitcoin (BTC), Ethereum (ETH) and Solana (SOL) within the same app they use for banking, borrowing and investing.
In December, SoFi launched a U.S. dollar stablecoin, SoFiUSD.
The company’s stock has performed well over the last year, gaining more than 25% of value during the period. But it recently became the target of a popular short-seller.
Muddy Waters Research, the investment research firm known for short selling, released a report on March 17 and called SoFi Technologies a “financial engineering treadmill, not a healthily growing origination business.”
The short-seller disclosed a short position in SoFi and accused the fintech firm of improper accounting practices. SoFi shareholders may be facing ongoing dilution as the management can meet bonus targets tied to loan valuations and off-balance-sheet structures that disguise borrowings as revenue, Muddy Waters claimed in the 28-page report.
There were more allegatory claims in the report:
SoFI seems to have a material misstatement of at least $312 million of unrecorded debt and there is a possibility of the company having made “more extensive” misstatements that Muddy Waters hadn’t detected.
SoFI’s personal loan charge-off rate is approximately 6.1%, not 2.89% as SoFi claims.
SoFi’s student loan segment exists primarily to generate fair value gains for management bonuses.
SoFI’s secured loan business is a seller-financed whole loan sales program.
SoFi’s 2025 Adjusted EBITDA is inflated by approximately 90%.
“Management effectively gets paid for diluting shareholders,” Muddy Waters claimed about SoFi Technologies.
