Investing.com -- SoFi Technologies shares fell roughly 4% on Tuesday after short seller Muddy Waters Research announced a short position in the company's stock.

Muddy Waters described SoFi as "a financial engineering treadmill, not a healthily growing origination business," according to the announcement. The firm alleged that SoFi shareholders face constant dilution so management can achieve bonus targets through loan marks and off-balance-sheet structures that disguise borrowings as revenue.

The short seller claimed SoFi has a material misstatement of at least $312 million of unrecorded debt. Muddy Waters said this raises the possibility of more extensive misstatements that have not been detected.

Muddy Waters calculated SoFi's Personal Loan charge-off rate at approximately 6.1%, compared to the 2.89% the company reports. The firm said SoFi's Student Loan business appears to exist primarily to generate Fair Value gains for management bonuses rather than for strategic or economic reasons.

The short seller described SoFi's Secured Loan business as a seller-financed whole loan sales program. Muddy Waters characterized the Loan Platform Business as a wet-funded forward flow transaction, which it called a disguised form of borrowing whose loan proceeds SoFi books as fee income, rather than a capital-lite tollbooth generating fee income.

According to Muddy Waters, management gets paid for diluting shareholders. The firm said failure to engage in any one of the alleged abuses would have a material impact on management performance bonuses, possibly eliminating them entirely.

Muddy Waters stated that SoFi's reported EBITDA of $1,054 million is inflated by approximately $950 million through manipulated charge-off rates, subsidized seller-financed sales, unrecorded borrowings, an off-balance-sheet lending structure that books borrowing proceeds as revenue, and capitalized marketing expenses excluded from the headline metric.

The firm identified at least $312 million in apparent unreported borrowings and a seller-financed sales program that fails all three criteria for sale recognition under ASC 860. Muddy Waters said management has locked in $58 million through instruments economically equivalent to stock sales while publicly claiming not to have sold shares.