Bombshell report calls Carvana an ‘accounting fraud’

Hindenburg Research, the same firm that targeted Nikola and Lordstown, has shorted Carvana stock, claiming financial impropriety

Just two years ago, Kavanagh was teetering on the edge of bankruptcy, hanging on by life and death. Now, with 2025 upon us, the company’s stock price has soared a staggering 284% during 2024. So, what has changed? Carvana said the shift is the result of innovation, volume growth and market share expansion.

However, the picture painted by the Hindenburg Research Center is far less rosy. The notorious short-seller, known for exposing Nikola as a “fraud” and accusing Lordstown Motors of misleading investors by exaggerating demand for its pickup truck and production capacity, claims Cavanagh’s revival is nothing more than an elaborate A mirage of design. Hindenburg claims financial impropriety is the reason for the company’s apparent comeback, raising questions about whether Carvana’s success is truly lasting.

Troubled past, now back in the spotlight

Carvana isn’t exactly known for its good reputation in the automotive world, or in the business world in general. The company has repeatedly lost its license to sell cars in Michigan, Pennsylvania and Illinois due to some type of misconduct. It sold stolen cars to customers, but once authorities figured out what happened, the people lost their cars.

More: Carvana now applies $4,000 used electric vehicle tax credit instantly at checkout

Despite a tumultuous history, things appear to be looking up after what appears to be a very successful year in 2024. The Hindenburg Research Center said that in fact, this was a “timeless father-son accounting fraud.” That’s the title of a new report about the brand. Their investigation said $800 million of the company was involved in questionable loan sales to possibly undisclosed related parties. This is just the tip of the iceberg.

Creative accounting or something worse?

Hindenburg said Carvana is not only benefiting from the booming used car market; It allegedly rigged the system through accounting tricks and lax lending practices. Hindenburg believes that many of Carvana’s loans to buyers who would normally default were extended by the company to keep delinquency rates low.

The accusations don’t stop there. Hindenburg emphasized Carvana’s close relationship with DriveTime, a loan servicing company owned by Ernie Garcia II, the father of Carvana CEO Ernie Garcia III. This is important because DriveTime is Carvana’s loan servicer. The two companies share the revenue generated through these loans and sometimes sell cars to each other. Based on the findings, Hindenburg opened a short position in Carvana.

It’s important to note that these claims don’t come from some random company. The Hindenburg Research Center has a history of successful short films. The company touts its research prowess and findings as the reason its correct call rate is so high. Multiple studies show that it is correct 75% or more of the time. However, we still don’t know whether Kavanagh’s call is true.