Famed short-seller Carson Block unpacks how he picks his bearish targets

• Carson Block's Muddy Waters Research unveiled a new short bet last week.
• The famed short seller described SoFi as a "financial engineering treadmill."
• Block spoke with Business Insider about how he identifies his short targets.

Carson Block has been taking aim at big companies with his scathing short reports for years.

The short-seller who founded Muddy Waters Research rose to fame on Wall Street in 2011 after alleging that Chinese agricultural firm Sino-Forest was guilty of fraud. His short call wiped billions in value from the company, whose investors include icons like hedge-fund billionaire John Paulson.

Muddy Waters has published many more short reports since then, most recently focusing on SoFi with claims that the company is a "financial engineering treadmill."

"SOFI is a financial engineering treadmill, not a healthily growing origination business," it stated. "SOFI shareholders are incessantly diluted so management can hit bonus targets through GE Capital-style loan marks and Enron-esque off-balance-sheet structures that disguise borrowings as revenue."

SoFi released a statement disputing the claims in Muddy Waters' report as inaccurate and saying that the short-seller does not understand its business. It declined to comment further when reached by Business Insider.

"We get sued a reasonable bit," Block said. "I've been doing this for almost 16 years. We're undefeated in terms of legal actions."

Block spoke to Business Insider following the publication of the SoFi report, discussing how he identifies his firm's short targets.

Block recalled that years ago, hedge funds would reach out to his firm with potential short targets, companies they were already betting against. But as the investing climate has shifted, his firm has found new ways to identify companies with major red flags.

The short-seller said that he doesn't focus too much on quantitative screening, as he finds that it often yields unreliable results. He prefers to use old-school research methods to find behavioral cues.

"To me, what is most interesting at the outset is printing out four years of every call or conference transcript and just reading them from earliest to most recent," he said. "And looking for emotional language, talking about big initiatives that subsequently disappear without explanation,"

He told Business Insider that he also looks for questions asked during the calls that went unanswered. In his view, reviewing physical transcripts is better than listening to the calls, as listeners can miss things said quickly or fail to pick up on a company leader dodging a question.Block said he used this method to formulate his short thesis on SoFi.

In his view, if things appear too good to be true, they are. He cited Applovin, a tech stock that Muddy Waters bet against in 2025, alleging misconduct. Block said that he thought the stock had risen too far, too fast, and added that heavy insider selling raised a red flag. Another recent short bet, Elf Cosmetics, is also an example of a stock's rise not aligning with what he believed was going on inside the company.

He said that SoFi fit his criteria for the "too good to be true" category. It performed well throughout 2025, but lost momentum in early 2026 and failed to recover after a capital raise that led to dilution.

Block noted that his firm had been looking into the company since shares began to decline. He said his digging culminated with a call to the firm's investor relations representatives, though that call, and others after, didn't yield answers to Muddy Waters' questions.