You can follow the short sellers. Or you can use Hudson Labs to beat them.

Short sellers do valuable work. A good activist report takes months of investigation, dozens of interviews with former employees, and real capital at risk behind a public accusation. When Hindenburg or Muddy Waters publishes, the market listens. And often, they're right for reasons that go well beyond what's in the filings. But the filings are where the story starts.

Before the short reports dropped, before regulators acted, and before stocks collapsed, the red flags were already there, buried in footnotes, spread across hundreds of pages, written in careful legal language. Related-party transactions. Internal control failures. Revenue recognition issues. Governance concentration. Companies are required to disclose all of it. 

Advanced artificial intelligence means Hudson Labs can quantify these risks at scale, across the entire US market. Hudson Labs AI reads every filing, surfaces every flag, and scores every company in real-time. Hudson Labs' forensic risk scores predict fraud. They’re specifically trained to predict SEC enforcement actions and settled class actions related to fraud. A score of 70 or higher means there’s a 1 in 3 chance of SEC enforcement in the next three years. 

The cases below show that Hudson Labs doesn't just flag these risks. It flags them long before the short report drops, before regulators act, and before the stock moves. Contact us for the whitepaper. Learn more about the forensic risk score here.

Super Micro Computer (SMCI)

Aug 25, 2023 — Risk Score: 82 (10-K, period ending Jun 30, 2023)

As covered in Forbes, August 2024, Hudson Labs assigned SMCI a risk score well above its peer average for years, driven by flags across Related-Party Relationships, Internal Controls, Earnings & Accounting, and Governance. Hudson Labs had been flagging SMCI as high risk for years before Hindenburg published a report on the company. 

Watch our CEO explain the Super Micro Computer scandal and AI's role in discovering the red flags on CNBC.

Related Parties — CEO's Family Controls Key Suppliers

• CEO Charles Liang's brother Steve Liang and his family own ~28.8% of Ablecom Technology, one of SMCI's key contract manufacturers. Charles and his wife, Sara Liu (also SVP and Board Director at SMCI), own another 10.5%. SMCI is buying chassis and components from a company that the CEO's family controls, and the company explicitly acknowledges it "may be disadvantaged" by this conflict.
• The same network extends to Compuware Technology, another related-party supplier, controlled by Ablecom, which is itself controlled by the CEO's brother. Related-party purchases from Ablecom and Compuware combined accounted for 6.6% of the total cost of sales in FY2023.
• CEO Charles Liang personally borrowed $12.9 million from the wife of his brother Steve, who controls SMCI's primary supplier. A personal loan from a key supplier's controlling shareholder's spouse, disclosed in a footnote.
• $70.5 million in non-cancellable purchase commitments to related parties as of June 2023.

Other red flags:

• No lead independent director.
• CEO's spouse, Sara Liu, received $9.35 million in total compensation in FY2023 as SVP and Board Director, while her family's ownership interests in key suppliers create direct conflicts.
• An active securities class action alleging misrepresentations regarding revenue recognition, carried across multiple years.

August 27, 2024

Hindenburg Research published its report alleging accounting manipulation, undisclosed related-party transactions, and export control violations. SMCI shares fell 2.6% on the day of the report. The following day, after the company separately announced it would delay filing its annual 10-K, the stock fell a further 19%.

Late 2024

Super Micro delayed its annual 10-K filing. Auditor Ernst & Young resigned. The DOJ and SEC issued subpoenas. The stock fell more than 60% from its March 2024 peak of approximately $1,200.

Cano Health (CANO)

March 14, 2022 — Risk Score: 86 (10-K, period ending Dec 31, 2021)

Hudson Labs had been flagging Cano as high risk since coverage began — scores of 84-86 through 2021 and into 2022 — driven by a restatement, multiple material weaknesses, a DOJ subpoena, and a major related-party revenue dependency.

Accounting & Internal Controls

• Restatement of quarterly financial statements across 2021, covering revenue recognition errors in Medicare Advantage variable consideration — restating balance sheets, income statements, and cash flows across three separate quarters
• Revision of previously issued 2019 and 2020 audited financial statements to prevent material misstatement carry-forward
• Three separate material weaknesses: (i) failure to establish controls over completeness and accuracy of accruals in the financial close process; (ii) failure to design controls over business combination accounting — including measurement of acquired assets, liabilities, and non-controlling interests; (iii) insufficient accounting personnel with appropriate GAAP knowledge and oversight

Legal & Related Parties

• DOJ subpoena received in May 2020 seeking records relating to the company's prescription of hydroxychloroquine during the pandemic
• Humana designated as a related party — generating $308.3 million in revenue in 2021 and $235.5 million in 2020, representing a significant concentration of revenue from a single related party
• Related party construction and leasehold improvement payments of $7.9 million, $7.3 million, and $5.5 million across 2021, 2020, and 2019

March 2022

A securities class action was filed alleging violations of the Securities Exchange Act on behalf of investors from May 2020 through February 2022 — covering the SPAC period through the restatement disclosure.

April 2023

Three board directors, including early investor Barry Sternlicht, resigned in protest. Sternlicht publicly called for CEO Marlow Hernandez's removal, stating his continued tenure was "harmful to the interests of stockholders." Cano shares fell 20% on the news.

February 4, 2024

Cano Health filed for Chapter 11 bankruptcy. NYSE immediately suspended trading and commenced delisting proceedings. The stock had last traded at $2.30, down more than 90% from its post-SPAC peak above $10.

October 2025

A $70 million lawsuit against CEO Marlow Hernandez settled confidentially on the eve of trial in the Eleventh Judicial Circuit Court of Florida. The suit alleged that Hernandez had personally misled Cano Health's board and two dental service providers in connection with a related-party transaction — specifically, that he arranged for Onsite Dental to acquire assets from a company owned by his wife for more than $30 million, while failing to disclose his conflicted interest or obtain proper board approval. The settlement provides no admission of wrongdoing. Hernandez denied the allegations.

RCI Hospitality Holdings (RICK)

May 09, 2022 10-Q — Risk Score: 76 (10-Q, period ending Mar 31, 2022)

(Continuously flagged as high risk since coverage began)

Hudson Labs assigned RICK a risk score of 76 – 82 across every filing in our coverage history — one of the most persistently elevated scores in our database. Key flags included:

Related Parties — Family Employment and Loans from Insiders

• Two adult children of CEO Eric Langan employed by the company in corporate shared services.
• Company borrowed from related parties as part of a $17 million private lender group — including a $500,000 note from Ed Anakar (brother of a former director) and a $150,000 note from a brother of CFO Bradley Chhay. The same pattern repeated in a prior $2.35 million borrowing.
• CEO Eric Langan personally guarantees all of the company's commercial bank indebtedness — an unusual arrangement that blurs the line between personal and corporate finances.

Legal & Regulatory — Prior SEC Enforcement

• SEC previously found the company failed to disclose related party transactions involving Langan's father, brother, and a director's brother — and lacked sufficient internal controls over these transactions.
• SEC order found CEO Langan and former officer Marshall violated proxy solicitation provisions of the Securities Exchange Act, and that the company violated reporting provisions, books and records requirements, and disclosure controls rules.
• Active securities class action alleging materially false and misleading statements in SEC filings related to related-party transactions and failure to maintain internal controls.
• Derivative action filed alleging related-party transactions, questionable uses of corporate assets, and failure to maintain internal controls — CEO, CFO, and multiple directors named.

Other red flags:

• Material weakness in internal controls identified — specifically over impairment of goodwill, indefinite-lived intangibles, and long-lived assets.
• The auditor issued an adverse opinion on internal control over financial reporting as of September 30, 2021.
• SEC order explicitly found the company "lacked sufficient internal controls concerning executive perquisites and related party transactions."
• $13.6 million in impairment charges in FY2021 across goodwill, SOB licenses, and property and equipment at multiple club locations — on top of $10.6 million in FY2020 and $6 million in FY2019. Three consecutive years of significant asset write-downs.

June 2, 2022

The Bear Cave published its first report on RCI Hospitality, flagging governance concerns, prior SEC accounting charges, the CEO's tight personal control of the company, and a pattern of undelivered strategic promises.

May 30, 2024 — Risk Score: 80 (10-Q, period ending Mar 31, 2024)

Bear Cave published a follow-up report after observing what appeared to be law enforcement raids at RCI's New York City nightclub locations. Bear Cave called the stock "uninvestable."

September 16, 2025

The New York Attorney General unsealed a 79-count criminal indictment against RCI Hospitality, CEO Eric Langan, CFO Bradley Chhay, and others. The indictment alleged that executives had bribed a New York state tax auditor — with private dances, paid trips to Florida, and $47,000 in cash — to avoid paying more than $8 million in sales taxes. Prosecutors allege the scheme ran from 2010 to 2024. The bribery payments were disguised as promotional expenses in the company's books.

RICK stock fell 16% on the day of the indictment.

November 2025

CEO Eric Langan and CFO Bradley Chhay resigned. A securities class action was filed. The stock is down approximately 60% since Bear Cave's first report in June 2022.

PACS Group (PACS)

April 2024 

Hudson Labs flagged PACS from its very first filing, surfacing governance concentration and structural risks visible in the S-1 itself. Though there is no risk score for S-1s. 

Governance & Related Parties

• Founders Jason Murray and Mark Hancock held majority voting power — NYSE controlled-company exemption invoked, meaning the board did not need to be majority independent, and a non-independent director served on the audit committee at IPO
• Both founders were permitted to pledge their shares as margin loan collateral during the IPO lock-up period — an unusual carve-out from standard lock-up restrictions
• Each founder retained the right to appoint up to two board nominees unilaterally and replace those nominees without shareholder approval
• Prior to the IPO, the company paid consulting fees to Helios Consulting LLC — an entity jointly owned and operated by both founders — terminated on December 31, 2023, immediately before going public

Accounting & Structure

• Co-founder Mark Hancock resigned as CFO effective January 1, 2024 — immediately before the IPO — reappointed as Executive Vice Chairman with a new CFO installed in his place
• A prior material weakness in internal controls had been identified and remediated, but no independent audit of controls was required at the IPO stage
• Cross-default and cross-collateralization provisions across mortgages and operating leases — a default on one facility could cascade across the entire portfolio
• PACS was a holding company with no operations of its own, entirely dependent on subsidiary cash flows

May 13, 2024 — Risk Score: 80 (10-Q, period ending March 31, 2024)

First scored filing. Score of 80 from the outset — elevated above peers from day one of coverage.

November 4, 2024 — Risk Score: 81 (Based on 10-Q field August 12, 2024)

Hindenburg Research alleged PACS had conducted a scheme to submit false Medicare claims — abusing a COVID-era waiver to access skilled care reimbursements — which Hindenburg estimated drove more than 100% of PACS' operating and net income from 2020 to 2023. Stock fell 27.78% on the day of the report.

November 6, 2024

PACS postponed its Q3 earnings and disclosed it had received federal civil investigative demands related to its Medicare billing practices. Stock fell a further 38.76% — a two-day collapse of approximately 66%. A securities class action covering investors from the IPO through November 5, 2024, was subsequently filed. The federal investigation remains active.

iRhythm Technologies (IRTC)

February 23, 2023 — Risk Score: 72 (10-K, period ending Dec 31, 2022)

Hudson Labs flagged iRhythm as high risk from the 2022 annual filing, driven by an escalating regulatory and legal picture that was building across successive 10-Ks.

Legal & Regulatory — A Four-Year Escalation

• Grand jury subpoena from the US Attorney's Office for the Northern District of California received March 2021, requesting information related to communications with FDA and the company's products — followed by a second grand jury subpoena in September 2021
• DOJ Subpoena Duces Tecum received April 2023 from the Consumer Protection Branch, requesting documents regarding the company's products and services
• FDA Form 483 observations issued August 2022 alleging quality system deficiencies including corrective and preventive action procedures, complaint handling, and medical device reporting
• FDA warning letter received May 2023 alleging non-conformities in medical device reporting requirements relating to the Zio AT System — explicitly flagging risk around the company's use of CPT code 93229, the billing code at the centre of the DOJ's reimbursement inquiry
• Industry precedent disclosed in the filing itself: a December 2023 DOJ settlement with BioTelemetry and LifeWatch for submitting claims for a higher level of cardiac monitoring than physicians had ordered or was medically necessary — the exact same allegation pattern facing iRhythm
• Two active securities class action lawsuits — one filed February 2021 naming the former CEO, one filed February 2024 naming the current CEO and CFO

Management Turnover & Internal Controls

• CEO resigned January 2021; COO resigned March 2023; Chief Commercial Officer resigned July 2022; Chief Clinical Officer retired June 2022; CFO resigned August 2024 — five senior executive departures across four years
• Prior material weaknesses contributed to restatements of revenues, revenue reserves, bad debt expense, property and equipment, and R&D expense going back to 2017-2019
• Multiple current and former executives named personally as defendants in securities class actions and derivative actions

July 1, 2024

The DOJ filed a Petition for Order to Show Cause in the Northern District of California seeking enforcement of its document subpoena — a significant escalation indicating iRhythm had resisted producing materials the DOJ had requested.

August 18, 2025

Spruce Point published its short report, citing the ongoing DOJ investigation, FDA warning letter, and Medicare billing risk around CPT code 93229. The DOJ enforcement action had preceded the short report by over a year — the regulatory risk Hudson Labs had been flagging for years had already materialised before Spruce Point published.

Carvana (CVNA)

February 22, 2024 — Risk Score: 60 (10-K, period ending Dec 31, 2023)

Hudson Labs flagged the following in Carvana's annual filing, more than 10 months before Hindenburg's report. At 60, Carvana's risk score sits in our medium-high range. We're including it because two separate short reports and an active class action have since confirmed the concerns our model was flagging.

Related Parties — Father-Son Structure at the Core of the Business

• The company explicitly disclosed it was "incubated by and may benefit from our relationship with DriveTime, not always negotiated at arm's length, as DriveTime is controlled by our controlling shareholder who is also the father of our chief executive officer." 
• $7 million due to related parties in accounts payable as of December 31, 2023
• $2.8 billion in finance receivables sold through securitization transactions in 2023 — a key revenue driver with significant accounting subjectivity.
• $144 million gain on loan sales in Q1 2024, included in revenue — a fast-growing and subjective income line.
• NYSE controlled-company exemption invoked — the majority of the board need not be independent, given the Garcia family's voting control.

Other red flags:

• Unconsolidated VIE exposure disclosed— off-balance sheet risk.
• $847 million goodwill impairment charge recorded in 2022.
• Senior Secured Notes indentures contain extensive restrictive covenants limiting the ability to incur additional debt, pay dividends, make investments, or sell assets.
• The company explicitly flagged "substantial indebtedness could adversely affect financial flexibility."

January 2, 2025

Hindenburg Research published "Carvana: A Father-Son Accounting Grift For The Ages," alleging $800 million in loan sales to a suspected undisclosed related party, accounting manipulation, lax underwriting, and insider selling. Shares fell 12.7% over the two trading sessions following the report (January 2nd and 3rd, 2025).

January 28, 2026

Gotham City Research published a second report amplifying the same related-party concerns, alleging Carvana's finances rely on undisclosed transactions with entities controlled by Ernest Garcia II, inflating earnings by over $1 billion. Stock fell 14% on the day of publication.

A securities class action remains active.

Celsius Holdings (CELH)

February 28, 2024 — Risk Score: 74 (10-K, period ending Dec 31, 2023)

Celsius was never the subject of a short seller report. Hudson Labs had been rating it high risk since 2022 — peaking at 76 in November 2023 — well before the stock collapsed. The flags below are from the 10-K filed immediately before the class period began. The securities class action that followed started the day after that filing.

Hudson Labs assigned Celsius a risk score of 74 — elevated above peers — on the day before the securities class action's class period begins. Key flags from that filing:

Revenue & Related Parties — PepsiCo Distribution Deal

• Pepsi designated as a related party following the August 2022 distribution agreement in which CELH issued ~1.5 million shares of Series A Preferred Stock to Pepsi for $550 million and concurrently entered into a distribution and transition agreement.
• In connection with the deal, Celsius terminated existing supplier and distributor agreements to transition territory rights to Pepsi – a significant operational dependency on a single related-party distributor.
• Pepsi holds a contractual right to a board seat, further entrenching the related-party relationship.
• Accrued promotional allowances of $99.8 million as of December 31, 2023 – nearly tripled from $36 million the prior year – the exact mechanism through which the PepsiCo inventory overhang later manifested. Flagged as a critical audit matter due to "subjective nature of management judgment."

Internal Controls — Three Consecutive Years of Failures in Revenue-Related Areas

• Material weakness in internal controls over revenue recognition, promotional allowances, and inventory accounting – identified in 2021, 2022, and 2023, never fully remediated.
• Auditor issued an adverse opinion on internal control over financial reporting.
• $315 million in promotional allowances recorded as a reduction to revenue in 2023, up from $158 million in 2022 and $64 million in 2021 — a rapidly growing and highly subjective line item that the company's own auditor flagged as a critical audit matter.

Legal & Regulatory

• SEC Division of Enforcement inquiry ongoing since January 2021, with subpoenas subsequently issued. Active and unresolved as of the filing date.
• Two separate derivative action lawsuits filed in 2023.
• Securities class action filed March 2022, amended complaint July 2022, still active.
• $82.6 million adverse jury verdict in 2023 related to a lawsuit by a former influencer, under appeal.

February 29, 2024

Celsius holds an earnings call the morning after the 10-K is filed. Management provides revenue guidance for 2024 without disclosing the scale of PepsiCo's inventory overhang.

September 4–5, 2024

At the Barclays Consumer Staples Conference, management discloses that PepsiCo orders in Q3 are running $100–120 million below the prior year as Pepsi works through excess inventory. Celsius stock falls more than 11% on the news. Further declines follow the Q3 earnings report in November 2024, where revenue fell 31% year-over-year.

November 22, 2024

A securities class action is filed against Celsius, alleging the company misled investors about the sustainability of its PepsiCo-driven revenue during the period beginning February 29, 2024 — the day after the 10-K filing Hudson Labs had flagged. The exact categories that drove the stock collapse — revenue recognition and promotional allowance accounting — were the same ones our model had been flagging as materially weak for three consecutive years.

From its March 2024 peak of $99.62, the stock is down approximately 65% — the collapse accelerating after the PepsiCo inventory disclosure in September 2024 and the Q3 earnings and revenue miss in November 2024.

What This Means for Investors

Short sellers spend months investigating risks that are, in many cases, already signalled in public filings. The deep work – former employee interviews, forensic accounting, confirming the thesis – is valuable and genuinely hard. But the starting point is often hiding in plain sight.

Related-party transactions, internal control failures, revenue recognition issues, governance concentration, legal exposure – companies are required to disclose all of it. It's just buried in footnotes, written in careful legal language, and spread across hundreds of pages.

That's what Hudson Labs is built to do: read every filing, surface every flag, and score every company in real time, so you see the smoke, even if no one's found the fire yet.

Book a demo to learn how Hudson Labs can transform your investment research workflow.