Shares of AppLovin Corp (NASDAQ:APP) slid 4.7% in premarket trading on Tuesday after a sharply critical report from short-seller CapitalWatch accused the software company of being entangled in global money-laundering networks.
In the report, CapitalWatch alleged that AppLovin has become a “safe haven” for illicit capital, claiming its ownership structure is connected to a Southeast Asian syndicate that funnels billions of dollars from Chinese Ponzi schemes and Cambodian fraud operations into U.S. financial markets. The short-seller asserted that these flows include proceeds from so-called “pig butchering” scams and other cross-border fraud activity.
The investigation centers on AppLovin’s largest shareholder, Hao Tang, whom CapitalWatch described as a “fugitive from Chinese justice” tied to the collapse of the $36 billion peer-to-peer lending platform Tuandai.com. The report went so far as to claim that “every dollar of his equity is drenched in the blood and tears of victims of illegal fundraising.”
According to CapitalWatch, illicit funds allegedly move through AppLovin’s advertising ecosystem to achieve what it calls “identity laundering,” with fabricated ad transactions used to legitimize criminal proceeds. The report further alleged a close relationship between Tang and Zhi Chen, chairman of Cambodia-based Prince Group, which the U.S. Department of Justice has designated a transnational criminal organization. CapitalWatch claimed that “AppLovin serves as the ultimate exit for asset laundering/diversion by transnational criminal kingpins.”
Beyond shareholder issues, the report accused AppLovin of misleading the U.S. Securities and Exchange Commission about its operations in mainland China. While AppLovin has previously denied having a significant presence there, CapitalWatch claimed to have identified an “operations team of over 15 people” in China that allegedly accesses U.S. user data without adequate oversight.
The short-seller also alleged that management carried out a “malicious ’Option Heist’” to remove equity from employees prior to layoffs, and that leadership treats anti-money-laundering rules as effectively irrelevant, stating that management “views Anti-Money Laundering (AML) laws as non-existent.”
CapitalWatch further claimed that AppLovin’s core products, including its Array platform and AXON algorithm, function as “digital weapons” for criminal groups by enabling the distribution of illegal gambling and fraudulent apps. The report alleged that a so-called “Silent Install” feature allows unauthorized software to be placed on devices without user consent, bypassing app store controls.
The firm described this as an “Ad-Spend-as-Laundering” model, in which criminal groups allegedly convert “black money” into legitimate revenue by paying large advertising fees to AppLovin, creating what CapitalWatch called a “perpetual motion machine powered by a Wall Street listed company and fueled by a Southeast Asian gang.”
CapitalWatch’s report adds to a growing list of critical assessments of AppLovin from short-selling firms including Muddy Waters, Fuzzy Panda and Culper Research. Those groups have previously raised concerns about AppLovin’s data practices, AI-driven growth claims and long-term sustainability, with some arguing the stock should be excluded from the S&P 500.
Muddy Waters has alleged that AppLovin “systematically” extracts user data in violation of app store rules, while Fuzzy Panda has described the company as a “House of Cards.” Together, these claims have fueled investor concern over potential scrutiny from U.S. regulators, including the Department of Justice and the Committee on Foreign Investment in the United States (CFIUS).
AppLovin CEO Adam Foroughi has pushed back against the broader narrative, announcing an independent investigation into the activities of the short-selling firms and insisting that the allegations are “false and misleading” and “aimed at personal financial gain.” While the company has not yet issued a specific response to the CapitalWatch report and did not immediately reply to a request for comment, AppLovin has previously said it maintains strong compliance and data-security controls.
For now, the stock reaction reflects heightened investor caution as markets weigh the seriousness of the accusations against AppLovin’s recent operating performance.