Alibaba Group Holding Ltd (NYSE:BABA) is no stranger to controversy. BABA stock arrived in the United States in late 2014. From the moment it debuted on the New York Stock Exchange, Alibaba became a hotly-debated company.

Its upside hardly needs description. As the leading online retail platform in China — soon to be the world’s largest market — the potential value is immense. Throw in its financial services arm, cloud computing division and hundreds of subsidiaries, and you have what seems like a global behemoth.

But there’s another side to the Alibaba story.

Short sellers have long hounded the firm, suggesting that it is too good to be true. A wave of Chinese firms went public, often via dubious reverse mergers, at the turn of the decade. A great number of these turned out to be frauds. American investors lost billions in one of the most shocking examples of corporate malfeasance in recent memory.

Muddy Waters Back on the Block

While many American investors ended up betting against Chinese stocks during this period, one investor led the way. That would be Carson Block, the founder of Muddy Waters Research. Muddy Waters put out numerous reports highlighting supposed wrongdoing at various Chinese firms earlier this decade.

Notable scalps included Sino-Forest, a Chinese timber company that purported to be a leading forest lands owner. The company obtained a multi-billion dollar valuation before Muddy Waters exposed the company’s fraudulent behavior. Famous investors, including John Paulson, were fleeced for hundreds of millions of dollars.

Recently, Muddy Waters has turned its attention to corporate misdoing closer to home. Mr. Block, for example, recently sued Equifax Inc. (NYSE:EFX) in relation to that company’s historic data breach.

Now, after a relatively quiet period, Muddy Waters is back on the prowl. They fired out this zinger of a tweet last week while linking to this blog post: “Entertaining and coherent dissection of how obviously fake BABA’s numbers are. Points out Singles Day claimed GMV exceeds ANNUAL rev of Sears/K-mart.”

We’ll take more about said blog in a second. It’s also worth mentioning that the influential investing magazine Barron’s wrote about Muddy Waters‘ critique of BABA stock. On top of that, entrepreneur and Dallas Mavericks owner Mark Cuban linked to the same blog post in a tweet addressed to President Trump suggesting more oversight of Alibaba’s operations.

BABA’s Numbers: Obviously Fake?

What did this anonymous blog post say that garnered attention from both Mr. Cuban and Muddy Waters? The attention-grabbing point was that Alibaba claims to have sold more merchandise in one day than Sears Holdings Corp (NASDAQ:SHLD) sells in an entire year at its more than 1,000 stores. If you don’t like the Sears analogy, consider that Alibaba claims to have sold as much stuff in one day as Target Corporation (NYSE:TGT) sells in five months of operations. Implausible to say the least. How does Alibaba supposedly overstate its sales figures? Brushing is one common technique for inflating retail sales.

Looking farther back into the blog’s archives, the author goes into much more detail. According to the Chinese government, the total online GMV (gross merchandise volume) is under $200 billion — Alibaba’s reported sales figures would account for 92% of the whole market. That doesn’t stack up, given the strong sales figures of JD.com Inc(ADR) (NASDAQ:JD) and other competitors. Alibaba also claims to be growing sales at a 50% annual rate, while the government says online sales are growing at less than 30% per year.

The blog also notes discrepancies in accounting techniques, concerns about insider stock selling, questions about transactions with related parties and a whole host of other issues. It also remains an unsolved puzzle as to how Alibaba delivers so many goods despite a seemingly antiquated logistics system.

Mounting Headwinds

Regardless of what you think of Alibaba’s figures, BABA stock faces rising near-term risks. For one, the company is likely to have to take markdowns on several of its large investments. Alibaba invests heavily in a variety of subsidiary businesses. In the past, it has marked up asset values on several of these holdings, citing rising market prices.

However, the math also runs in reverse. Alibaba Health (ticker 241 in Hong Kong) has lost more than half its value since 2015. Alibaba hasn’t taken an earnings writedown on this — yet. Same goes for Alibaba Pictures (HK ticker 1060), which has plunged from HK$4 to under HK$1 today. Again, Alibaba, at a parent level, hasn’t written off any loss yet.

In addition to those upcoming earnings bombs, look for trouble with the core retail business. A recent Technode report highlights how Alibaba and other online retailers are relying on questionable consumer financing schemes to provide credit to Chinese shoppers. The government is now cracking down on this form of consumer lending. Recent Chinese consumer finance IPO Qudian Inc – ADR (NYSE:QD) has already lost more than 60% of its value over the past month in response to the crackdown.

Final Verdict on BABA Stock

Investors continue to value BABA stock as though it’s a world-dominating firm. And maybe it will be. But there are plenty of reasons for skepticism. Noted short sellers such as Jim Chanos have said Alibaba’s accounting is as bad as Enron’s was. The SEC has had numerous pointed exchanges with Alibaba over its filings.

Many observers grant that Alibaba is probably overstating its GMV figure, even if they are bullish on the price of BABA stock. And there are reasons to be skeptical of how things are going over at Alibaba’s key related party, Ant Financial.

China is obviously one of the huge growth markets left in the world. It’s understandable why everyone wants to invest there. But BABA stock, at its massive $475 billion market cap, is almost certainly the wrong way to play it. Concerns about Alibaba’s operations are so widespread, I should note, that even a recent documentary — The China Hustle — included a cautious segment about risks at Jack Ma’s business.

There’s substantial implosion risk, while, on the upside, even Alibaba hitting a trillion-dollar market cap only doubles your money.

I have my questions about competitor JD’s numbers as well. However, JD has just a $55 billion market cap. It has far more potential upside to offset the fraud risk.

At the time of this writing, Ian Bezek owned JD stock. He had no position in any of the other aforementioned securities. Additionally, he worked at a China-focused hedge fund that short sold numerous Chinese equities between 2011 and 2013. You can reach him on Twitter at @irbezek.