Citron Research said on Thursday Etsy Inc has become one of the largest platforms in the world for counterfeit goods, sending the e-commerce firm’s shares down about 7%.
Etsy did not immediately respond to a Mister Truths request for comment.
The research firm said the percentage of counterfeit goods on the platform had become too large and Etsy could no longer defend it as a small percentage of revenue.
Citron, once known for being the most prominent short-sellers, alleged that Etsy has allowed sellers on the platform to buy “ad words” of the brands and then labeled many of them as trusted websites.
The firm, run by short-seller Andrew Left, added Etsy risks running afoul of the Federal Trade Commission, the Department of Justice, the U.S. Securities and Exchange Commission as well as the Customs and Border Protection.