SenseTime plunges after short seller alleges the Chinese AI firm.
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SenseTime plunges after short seller alleges the Chinese AI firm.

U.S. short seller Grizzly Research accused SenseTime of inflating its revenue on Tuesday, sending shares of the Chinese AI firm down as much as 9.7%.

Research firm Grizzly Research accused SenseTime of “revenue roundtripping” in a report on Tuesday.

According to Grizzly Research, “SenseTime provides funds directly to customers or indirectly through intermediaries to buy goods from SenseTime that may never arrive.” Two Chinese court cases described the scheme, according to the short seller.

According to a Hong Kong Stock Exchange filing, SenseTime is reviewing the allegations and considering what action to take to protect all shareholders’ interests.

According to the Chinese firm, Grizzly Research’s report contains unfounded allegations and misleading conclusions and interpretations.

“There is a lack of understanding of the Company’s business model and financial reporting structure, as well as a lack of thorough reading of the Company’s public filings,” said SenseTime.

As one of China’s most exciting artificial intelligence companies, SenseTime is best known for its computer vision technology, which powers facial recognition software.

The company, however, has been subject to U.S. government sanctions. Washington placed SenseTime on the Entity List in 2019, which prohibits American firms from doing business with it. In Xinjiang, the U.S. alleges that SenseTime violates human rights.