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AppLovin sent a cease and desist letter to CaptialWatch Monday, claiming the short-seller’s report that the company “serves as a ‘digital laundromat’ for criminal syndicates” is defamatory and baseless.
“Your respective ‘reports’ contain numerous absurd and demonstrably false statements of purported fact about AppLovin,” the letter states, calling the findings “conspiratorial musings.”
The letter demanded that CapitalWatch retract its 35-page report published last week, as well as follow-up statements.
CapitalWatch posted a statement on Wednesday standing by its report.
“Our coverage reflects a rigorous six-month investigation supported by documentary materials and multiple sources, including investors, alleged victims of financial fraud, and whistleblowers,” the firm wrote on X. “We will continue reporting, including the next installment in our series, “9 Questions for AppLovin.”
CapitalWatch said in the statement that it is not a short-selling firm and referred to itself as an independent media outlet without a financial interest in AppLovin.
In its terms of service, the company said it does not hold positions “in the securities of the companies mentioned in our reports or articles.”
It does not specify if the company, affiliates or staff hold positions in other stocks.
CaptialWatch’s initial reports allege that it uncovered “systemic compliance risks and suspicions of major financial crimes” within the ad-tech company’s capital structure in its report.
AppLovin did not respond to a request for comment on the letter.
In its report, CapitalWatch alleged that there was a close relationship between Hao Tang, a major AppLovin shareholder, and Chen Zhi, who is chairman of Cambodia-based Prince Group.
The U.S. Department of Justice charged Chen Zhi with wire fraud conspiracy and money laundering conspiracy in October, seizing approximately $15 billion of bitcoin from his cryptocurrency wallets.
The U.S. Treasury Department named Prince Group a “Transnational Criminal Organization” on the same day.
CapitalWatch alleged that Tang and Zhi’s ties in the Hong Kong capital market and in Southeast Asian business operations “prove they belong to the high-level nodes of the same criminal group.”
“AppLovin does not work with the Prince Group, WowNow, or—to its knowledge or belief—any affiliates thereof,” the company said in its letter to CapitalWatch. “Of course, you fail to identify any evidence or support to suggest otherwise.”
In 2022, Prince Bank, which is owned by Prince Group, partnered with WOWNOW for online payments. WOWNOW is Cambodia’s largest “super app” that offers food delivery, ride-hailing and shopping services.
In the letter, AppLovin told the short-seller to preserve all documents and communication about the company.
AppLovin stock 5-year chart.
CapitalWatch is the latest short-seller to raise concerns about AppLovin, following critical reports from Muddy Waters, Fuzzy Panda and Culper Research last year.
In March, Fuzzy Panda urged the S&P 500 Index Committee to exclude AppLovin from the benchmark index. The short-seller’s letter reiterated earlier allegations of fraudulent ad tactics, arguing that the company doesn’t meet the S&P 500’s “gold standard.”
AppLovin CEO Adam Foroughi has denied allegations made by short-sellers in the past.
“It’s disappointing that a few nefarious short-sellers are making false and misleading claims aimed at undermining our success, and driving down our stock price for their own financial gain,” Foroughi wrote following reports from Fuzzy Panda and Culper in February.
Since going public in April 2021 at about $65 per share, AppLovin’s stock has been on a tear, now trading at about $550 per share.
The stock had a monster 2024, gaining more than 713%.
