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Hindenburg Research, an investment research firm with a focus in activist short-selling which also publishes reports on alleged fraud by other companies, has chosen DraftKings (DKNG) as its next target. Shares are down around 7% in pre-market after Hindenburg announced that it would be taking a short position on the American sports betting operator. DraftKings was not immediately available for comment.

In its report titled “DraftKings: A $21 Billion SPAC Betting It Can Hide Its Black Market Operations,” published this morning, Hindenburg describes the company as having experienced “one of the more successful deals in a recent wave of SPAC transactions marred by scandal and bad actors.”

DraftKings, which went public in early 2020 after a merger between DraftKings, its SPAC, and SBTech, a gaming technology company based in Bulgaria, has since experienced gains in its share price of around 400%.

“Unbeknownst to investors, DraftKings’ merger with SBTech also brings exposure to extensive dealings in black-market gaming, money laundering and organized crime,” the report read. “Based on conversations with multiple former employees, a review of SEC & international filings, and inspection of back-end infrastructure at illicit international gaming websites, we show that SBTech has a long and ongoing record of operating in black markets.”

According to the report, Hindenburg estimates that approximately 50% of SBTech’s revenue is generated from markets in which gambling is outlawed, citing DraftKings’ SEC filings, correspondence with former employees, and other supporting documents.

The report then goes on to cover the operations of BTi/CoreTech, which Hindenburg describes as a “distributor entity” with around 50 employees which SBTech uses to “distance itself from its black-market dealings.”

“Illicit customer relationships were shuffled into a newly formed ‘distributor’ entity called BTi/CoreTech, with ~50 SBTech employees shifted across town to the new entity,” the report read.

Past targets of Hindenburg include Nikola (NKLA), Chinese firm Ebang (EBON), Clover Health (CLOV), and Loop Industries (LOOP).

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