Be warned. We are activists. We are biased.
We do our best to find and present facts, based on extensive primary research and using public sources.
​But we will profit if these stocks decline or, when we are long, rise in value.
We do not offer advice on how anyone else should trade a stock. We present our views.

MQ

The Marqeta house of cards may come tumbling down: an FBI investigation

could prompt MQ to lose up to 70% of its business. Future revenue looks

​weak for this “dinosaur” of a payments-processing company.

  • Marqeta (MQ) is (mostly) a payment processor. MQ helps fintechs host their own payments tools by contracting with a Banking as a Service (BaaS) partner bank to manage client deposits. As the intermediary, MQ earns a small percentage of swipe fees. Small banks looking for growth generally enter into these partnerships, and those banks often rely on the middleman processor for compliance.
  • A collapsing MQ would be just one more in a series of BaaS-related businesses to go under. Since the 2023 troubles at Silicon Valley Bank, Signature Bank, and Silvergate, regulators have cracked down on BaaS providers, and companies like Synapse, Solid, and Evolve have folded under the weight of compliance failures and regulatory scrutiny. Big banks are disintermediating companies like MQ. The model is dying.
  • We have discovered an FBI investigation into MQ’s partner, Sutton Bank, likely for alleged anti-money laundering (AML) failures. MQ’s biggest client is Cash App, which has been credibly alleged to enable lawbreaking. Those allegations have brought intense regulatory pressure to the tiny Ohio bank on which MQ depends for its processing of Cash App transactions. [1]
  • If Sutton folds or pulls out of the partnership, we think MQ will shrink to a mere shadow of itself. Former executives with several years managing MQ’s relationship with Sutton say a switch would take years and is practically impossible.
  • MQ was once a pioneer of the BaaS model. The tide turned in summer 2023, when MQ’s largest customer, Cash App owner Block (formerly Square, XYZ), took back more authority over accounts and left the risky part—clearing transactions—to MQ. Since then, MQ is taking on small clients with high churn. MQ expects another hit to revenue related to Cash App later this year. Far from a one-and-done, the damage from Block’s redefinition of their relationship is ongoing.
  • We think MQ is especially vulnerable to the squeeze on the BaaS sector. Former executives call MQ a “dinosaur.”  One commented, “It reminds me of AOL 25 years ago.”
  • MQ’s regulatory headaches include potential bank liabilities for over 50 mln account holders.
  • MQ’s attempts to reinvent itself outside the risky Cash App processing business have not worked to sideline Block or Cash App. Revenue is excessively concentrated. New client wins like the Found Mastercard and Rain Card are small and niche, while onboarding times have ballooned from 150 to 200 days. MQ’s contracted backlog provides some preview of revenue, and that backlog has declined since Q1 2024
  • MQ is obscuring its weakness with window dressing and an empty acquisition. We calculated a decline in gross profit margin for quarters when MQ reported growth in that metric. Nor has MQ actually reduced its dependence on a single client. MQ is consistently getting lower payments per transaction. A 2023 “pre-revenue” acquisition that cost almost $300 mln has done nothing for MQ.
  • MQ hoped that higher-margin credit cards from the 2023 acquisition would make its technology relevant again. But formers tell us that MQ has a negligible credit card business, probably sub 1%.
  • Executives are being pushed out, as MQ acts panicky: Formers have told us that top executives are being fired for failing to sign new partners. MQ CEO Simon Khalaf “stepped down” in February 2025, the day the company issued its 10K, and has been replaced by an interim CEO. Before Khalaf, former CEO Jason Gardner stepped down as executive chairman in Q2 2024, apparently in a big hurry—he forfeited a whopping $167.3 mln in compensation.
  • We think expectations will be disappointed in Q2 or FY2025: MQ has not taken into account the macro headwinds its partner Block sees. It claims lighter regulation, but evidence tells a different story. Cost cutting looks like it’s gone as far as it can.
[1] Sutton explains its relationship with Cash App here: https://www.suttonbank.com/services-tools/tools/prepaid-card-support.html?utm_source=chatgpt.com

FEATURED REPORTS

October 3, 2024

NNE

The Rampant Stock Promotion and Undisclosed Related Parties Behind the Empty Shell that is NNE
  • We believe this back-of-the-napkin nuclear idea is an obvious stock promote. The self-promotional founder, Jay Jiang Yu, and his team of market bro directors have been involved in a half dozen penny stocks that fell between 40-100% post IPO. The founder and nearly all directors lack any experience in the nuclear industry.
  • Jay Yu deploys an army of interns and a plethora of affiliated media companies like Financial Buzz Media Networks and Nuclear Insider to promote NNE, which has been called a “shameless grift.”  We are stunned by the outrageously blatant stock promotion, which had pushed shares up by about 300% as of October 2 with, we believe, zero substance.
    • We conducted onsite checks and learned that NNE shares the same space as an undisclosed related party called LIST. LIST raised almost $12 mln in August  for a suspiciously similar plan to NNE’s.  We suspect LIST may be financially involved with NNE’s “new headquarters” building in Oak Ridge, Tennessee. 
  • NNE CFO Jaisun Garcha is simultaneously CFO of at least five other companies, four of which look like failures while one is undisclosed related party LIST. 
  • NNE just spent $1.7 mln on a “headquarters” in Tennessee even though the $33k/mo lease on its office in New York (for fewer than five staff members we observed during a site visit) does not expire until 2031. The purchased building is in the same office park as LIST—which actually has executives in Tennessee and has earmarked about $1 mln for “refurbishing” an unnamed space in the Heritage Center.
  • Dilution is coming. After raising $10.4 mln net in May 2024, NNE has offered another roughly $18.6 mln net in shares, and the company says it will need “potentially hundreds of millions of dollars” to develop a product.  Lock-up for large inside owners ends in November. 
  • Service providers are notoriously third-tier. The auditor, WithumSmith+Brown, in February 2024 was fined by the PCAOB for poor audits. The bookrunner, The Benchmark Company, has been sanctioned multiple times by financial authorities.  Investors are organizing a lawsuit against NNE for “laughable” regulatory claims.
  • Management paid itself roughly $1.5 mln in 2023 despite 0 revenues and even though NNE reported no full-time employees.​
January 5, 2024

HUT

Insider Enrichment Scheme,

​and ~30% of Revenue May Be Fabricated

  • Hut 8 recently merged with U.S. Bitcoin Corp. (USBTC). We uncover that USBTC is backed by promoters with a history of legal trouble. In its short existence, USBTC appears to have defaulted on a loan and paid two government fines, one for committing securities violations.1  
  • One of USBTC’s largest shareholders is an undisclosed related party.
  • Our diligence highlights USBTC’s core asset, purchased from bankrupt Compute North, has historically failed to provide energy and high-speed internet--unquestionably the two most important inputs for mining Bitcoin. Compute North’s bankruptcy docket showed that no one else wanted the assets, aside from one bankrupt entity, which bid up the price of USBTC.
  • One person highly familiar with USBTC told us, “without the merger, [USBTC] would have done a structured bankruptcy.” Why then did HUT pay $745 mln to acquire this company and its planned payments? Even worse, we estimate a value for USBTC that’s as much as 70% less. Typically, such egregious over-payments occur only when management is being enriched.
  • Ultimately, we strongly believe that shareholders are likely to feel the pain of being on the wrong side of an over-levered pump-and-dump, only to be left holding the most inefficient Bitcoin miner, which is unprofitable even at a Bitcoin price of over $60,000.

AXTI

AXTI may be on the brink of collapse

Picture
  • AXT Inc (AXTI), a manufacturer of geranium, gallium arsenide, and indium phosphide (key ingredients for LED and semiconductor chips) saw a 140% increase in share price in February, following management’s enthusiasm about AI opportunities.
  • AXTI is listed in the U.S., but its business operations are almost all conducted through a subsidiary in China. AXTI wants to list that subsidiary in Shanghai to capture new financing. But the listing prospectus attracted unexpected scrutiny and unveiled a plethora of undisclosed issues in China. Our research has found those issues are only the tip of the iceberg.
  • The listing vehicle raised $49 mln from private investors at a sky-high valuation in 2020. AXTI expected to capture much more investment at the time of the IPO. But it has been 18 months since the last IPO update, and U.S. investors haven’t been told that the IPO has apparently been blocked by Chinese regulators.
  • In March 2023, Chinese press reports said: AXTI’s subsidiary, Tongmei, saw its “IPO blocked: The U.S. semiconductor ‘shell company’ was split off for [a local] listing, related-party transaction prices were unfair, and the authenticity of company performance was questionable.”
  • We have uncovered a deluge of reasons why Chinese regulators potentially blocked this IPO, including falsifying data, tax evasion, improper storage of hazardous chemicals, suspicious related-party transactions, IP litigation, and defaulting on wages to employees.
  • Sales have collapsed by over 50%, and there is no reason to believe that AXTI can revert to its formerly reported margins and sales numbers, despite the claims that they make about AI demand.
*Please see then full report for important footnotes
November 8, 2024

INOD

Hidden Grand Jury DOJ Investigation ​Into Innodata Revealed
September 20, 2024
INOD

"Mag 7" agreements likely
smaller than claimed,
revenue and expenses
exaggerated

We think a META "commitment" for >$100 million may be overstated by 90%

  • INOD’s stock is up 179% since April this year, when the company announced and later provided staged updates on its big “Mag 7” contract.
  • Our forensic research unveils INOD’s marquee agreement, which formers say is with Meta Platforms, might be 90% overstated.
  • We think that INOD has consistently misled investors on over $100 mln in spending “commitments” from META. We spoke to formers who said it was “very unlikely that INOD had this contract,” and a META executive who oversees outsourcing for AI said he hasn’t even heard of Innodata. META publicly has said nothing about INOD.
  • The bull case for INOD is that the company can repeat the success it has had with META across other Mag 7 accounts. But how do you replicate business that may not exist?
  • Local filings for INOD foreign subsidiaries don’t match SEC disclosures. Revenue may be overstated by around 25%
  • INOD’s finance positions are a revolving door. A former finance executive suggested that the currently acting CFO is in place simply to sign off on the statements. He termed INOD’s closed culture a “hermit kingdom” and said INOD does not respond well to internal scrutiny of financials.​
  • Based on headcount and average compensation in Asian financials, we estimate a minimum of $16 mln in inflated costs—at least 19%. ​
  • ​We do not think the reported $50 mln in “unremitted foreign earnings” can be real. 
  • With 27% of group revenue from a single customer in Q2 2024, INOD can miss projections with no notice. This happened in Q1 2023, after the Twitter account dropped.
  • Investors think INOD is recovering from accusations of “AI washing.” We believe it’s much worse: INOD appears to claim revenue that it does not have. As a former executive said to us, it’s just “people in Asia banging away at keyboards.”
May 20, 2024

BTMD

BTMD May Make You Sick

Picture
Photo presented by competitor Pro-pell as illustrating risks associated with hormone therapy.
  • BTMD offers hormone and “nutraceuticals” products that purport to slow aging and increase sex drive. But many former patients say the treatments make people sick, sometimes fatally. 
  • Patients often get irritable, develop acne, experience voice changes, and grow facial hair. Dangerous side effects can include cancer and cardiac problems. One lawsuit says that the (male) patient “developed breast cancer specifically as a result of the “improper, inappropriate, unsafe, and unnecessary hormone therapy that he received . . .per BioTE’s hormone replacement Pellet Therapy program.”
  • BTMD does not test products coming out of the compounding facilities and sometimes ignores appropriate hormone release levels. A 2021 lawsuit alleges that BTMD instructed its “trusted providers” to “patently disregard the patient’s objective Testosterone lab values.
  • We learned from the FDA that BTMD does not check products coming out of the compounding facilities. A 2021 lawsuit alleges that BTMD instructed its “trusted providers” “to patently disregard the patient’s objective Testosterone lab values.
  • One of BTMD’s three suppliers5 has been accused of blinding patients due to negligence.
  • • We believe BTMD’s business could be cut by over 70% if the FDA determines that the hormone treatments it pushes need to be regulated as drugs.
  • A key supplier has “received approximately 26 reports of adverse events related to your Testosterone and Estradiol implantable pellets, including reports of death, heart attack. stroke, When we asked clinicians, they were unaware of the adverse events.
  • To promote its products, BTMD reports “studies” that say “hormones are compounded in . . . licensed FDA outsourcing centers and are held to strict standards.” But BTMD’s suppliers have been told by the FDA that their facilities do not meet the standards for a licensed compounding facility.
June 27, 2023

LI

Behind the Latest Lithium

​Promote​

  • American Lithium (NASDAQ: AMLI, TSXV: LI) appears to have siphoned >$100 mln to parties we think are related, most of which appear undisclosed.
  • Our review of official documents indicates that AMLI paid several million to companies controlled by the founder’s daughter, an optician.
  • AMLI bought assets from notorious promoter Jason Christopher Shull, who was later blocked by Canadian regulators from transacting in several listed companies.
  • Using official documents, we reveal many significant payments to controversial figures such as Talal Yassin, Edward Reisner, and Anders Nerell. All three have been implicated in promoting penny stocks embroiled in controversy, including in cannabis and mineral exploration.
  • AMLI is spinning out a uranium asset in Peru that we think will never be mined. Experts believe extracting the uranium, which is mixed with lithium, is very difficult to do safely, nor has this type of deposit ever been mined at scale.​
  • Regulators have not granted a mining permit to the Macusani asset, which is plagued by environmental problems and protests by the local community. We question whether the spinoff is to distance AMLI from social and environmental fallout.
  • AMLI has paid large sums to marketing companies like Native Ads and Promethean Marketing that contract with penny-stock executives to pump their companies’ shares. Promethean’s owner was charged by the SEC in a “long-running fraudulent scheme." Native Ads uses sites it discreetly owns to promote the share prices of small cap stocks and was involved in promoting accused fraud Standard Lithium.
  • Don’t be fooled twice: the company founders have a long history of promoting stocks that surged in price then crashed: the ones we tracked dropped by an average of 87%.
  • AMLI has just acquired 9.9% of Surge Battery Metals (NILI CA), which looks like another related party. Surge is a hugely loss-making company with significant board overlap.
  • In November 2022, the Ontario Securities regulator ordered that company CFO Philip Gibbs be prohibited for one year from acting as a director of any reporting issuer because he had “misled investors.” Gibbs remains company CFO.
  • The type of lithium deposit in AMLI’s marquee project, TLC, is laced through clay and has never been commercially exploited.​
October 7, 2021

FFIE

Move Over, Lordstown:
at Faraday, EV Stands for "Embezzlement Vehicle"

We don't think Faraday Future (FFIE), an EV SPAC, will ever sell a car. So far, it's nothing but a bucket to collect money from U.S. investors and pour it into the black hole of debt created by its founder, China's best-known securities fraudster, Jia Yueting.

Jia is the Chinese equivalent of Elizabeth Holmes. But just as she might be able to raise money if she fled to China, so Jia has moved to the United States, where there's a new pool of gullible investors.
 ​
Picture
​Cartoon by Johannes Leak
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