AppLovin Fires Back at Short-Seller CapitalWatch Over “Defamatory” Report
AppLovin has formally responded to a critical report from short-seller CapitalWatch, which alleged the ad-tech company functions as a “digital laundromat” for criminal syndicates. The mobile advertising giant issued a cease and desist letter on Monday, vehemently denying the claims as defamatory, baseless, and the product of “conspiratorial musings.”
The letter, addressed to CapitalWatch, demanded an immediate retraction of the 35-page report published last week, along with any subsequent statements. CapitalWatch’s report detailed what it described as “systemic compliance risks and suspicions of major financial crimes” within AppLovin’s capital structure.
At the heart of CapitalWatch’s allegations lies a purported close relationship between Hao Tang, a significant AppLovin shareholder, and Chen Zhi. Chen Zhi, who chairs the Cambodia-based Prince Group, was indicted by the U.S. Department of Justice in October for wire fraud conspiracy and money laundering conspiracy. The DOJ also seized approximately $15 billion in bitcoin from his cryptocurrency wallets. On the same day as Chen Zhi’s indictment, the U.S. Treasury Department designated Prince Group as a “Transnational Criminal Organization.” CapitalWatch asserted that the ties between Tang and Zhi in the Hong Kong capital market and Southeast Asian business operations indicated they were “high-level nodes of the same criminal group.”
AppLovin directly refuted these assertions in its letter. “AppLovin does not work with the Prince Group, WowNow, or—to its knowledge or belief—any affiliates thereof,” the company stated, challenging CapitalWatch to provide evidence supporting its claims. It is noteworthy that in 2022, Prince Bank, an entity under Prince Group, did engage in a partnership with WOWNOW, Cambodia’s largest “super app,” for online payment services.
The cease and desist letter also instructed CapitalWatch to preserve all documents and communications pertaining to AppLovin. This action places AppLovin within a recent pattern of scrutiny from short-selling firms. In the past year, AppLovin has faced critical reports from notable short-sellers including Muddy Waters, Fuzzy Panda, and Culper Research. In March, Fuzzy Panda even petitioned the S&P 500 Index Committee to remove AppLovin from the benchmark index, echoing prior allegations of fraudulent advertising practices and questioning the company’s adherence to the index’s “gold standard.”
AppLovin CEO Adam Foroughi has previously addressed these allegations, dismissing them as the work of “nefarious short-sellers” seeking to undermine the company’s success for personal financial gain. In a February statement following reports from Fuzzy Panda and Culper, Foroughi characterized the claims as “false and misleading.”
The exchange between AppLovin and CapitalWatch highlights the ongoing tension between public companies and short-sellers in the financial markets. The ad-tech sector, in particular, has faced increasing regulatory and investor scrutiny regarding its business practices and the transparency of its revenue streams. AppLovin’s robust legal response signals its intent to aggressively defend its reputation against what it deems unfounded accusations.
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