A Major Short Seller Just Attacked SoFi. Here's Why the CEO Is Buying Hand Over Fist

Key Points
A short seller alleges that SoFi's lending business is in much worse shape than the company reports.
The company says that the report is false and misleading.
It is unclear which party is correct right now.
- 10 stocks we like better than SoFi Technologies ›
The world for SoFi Technologies (NASDAQ: SOFI) just became messier. A famous short seller -- Muddy Waters Research -- released a report last week alleging that the fast-growing lender is engaging in misleading accounting to boost its reported profitability to shareholders.
Now, SoFi's stock has fallen below $20 and is down almost 50% from all-time highs set earlier in 2025. The company claims that this short report has no merit, and the longtime CEO, Anthony Noto, recently bought shares in the open market. Here's what the insider buy could mean, and whether now is a great time to buy the dip on SoFi stock.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Short seller claims and a company defense strategy
SoFi operates as a digital disruptor for the banking world. With the tag line "Get Your Money Right," it wants to become a mobile app that lets customers save money and take out loans. It offers dozens of products, including high-yield savings accounts, credit cards, and personal loans. With high interest rates compared to the competition, SoFi has been able to rapidly attract deposits from customers. It added $4.6 billion in deposits last quarter alone, bringing its total to just under $38 billion.
What Muddy Waters is concerned about is not SoFi's deposit acquisition, but the personal lending business. While the report is lengthy, three main allegations could be detrimental to the business if proven true.
First, Muddy Waters alleges that SoFi is retaining risk on loans it sells for fee income, which could require restated financials and an investigation by the SEC. Second, the short research firm claims that SoFi's loss rates -- meaning how many loans are delinquent -- are closer to 6.1%, compared to the 2.89% rate the company reports for personal loans. Third, Muddy Waters believes that SoFi is lending money to third parties, who then return that borrowed money to buy SoFi loans, a practice known as circular financing.
If one or more of these allegations prove true, SoFi's business could be in serious trouble.
Time to buy the dip?
SoFi management immediately issued a statement after the report was released, calling it factually inaccurate and intended to mislead investors, and said it would take legal action against the short seller. Noto even bought some stock in the aftermath of the release. This was done as a vote of confidence in the business, with Noto trying to align his own financial interests with those of the shareholders. His personal stake is valued at around $200 million, depending on the stock's price.
So, who is correct: SoFi or Muddy Waters? Well, unfortunately, right now, retail investors do not know for certain. It could be a mix of both. If you believe in SoFi management's integrity, now could be a great time to buy the dip. However, if even some of what Muddy Waters alleges proves true, the stock is going to fall a lot further from here.
Should you buy stock in SoFi Technologies right now?
Before you buy stock in SoFi Technologies, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and SoFi Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $503,592!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,076,767!*
Now, it’s worth noting Stock Advisor’s total average return is 913% — a market-crushing outperformance compared to 185% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
*Stock Advisor returns as of March 25, 2026.
Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.