Etsy shares tumble after Citron Research’s counterfeit claim

Citron Research said Thursday Etsy 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 Reuters 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 that Etsy risks running afoul of the Federal Trade Commission, the Department of Justice, the Securities and Exchange Commission as well as Customs and Border Protection.

Some analysts expect Etsy to see a grim holiday quarter as lower-income consumers rein in spending on home goods, clothes, jewelry and accessories, which combined make about 60% of the company’s gross merchandise value.

In November, the e-commerce platform posted a third-quarter loss for the first time in eight quarters, hurt by higher shipping costs and a strong dollar.