Roblox Corporation stocks dipped on Tuesday after a new report from investment firm Hindenburg Research, which accused it of deliberating inflating its daily active user stats and fostering what it described as an “X-rated pedophile hellscape” for children.

As reported by the Wall Street Journal, Hindenburg Research is a well-known short-selling firm known for investigating high-profile stocks and making bets against them, which sometimes leads to investigations by the U.S. Justice Department. Its previous targets have included green transportation company Nikola, India’s Adani Group, and Super Micro Computer.

A former data scientist told us that activity in Vietnam ‘inflated a lot of our numbers. Like crazy, insane, in terms of engagement, DAU[s]’ In its report, Hindenburg Research says Roblox’s claim of 79.5 million daily active users is inflated by between 25 percent and 42 percent, citing a technical consultant that it says monitored 7,200 Roblox games across 2.1 million server, collecting 297.7 million rows of real-time player data. It also notes that in 2023, Roblox told the SEC that it is “unable to identify if a user has multiple accounts,” and claims that a large amount of engagement stems from bot rings operating out of countries such as Vietnam.

“A former data scientist told us that activity in Vietnam ‘inflated a lot of our numbers. Like crazy, insane, in terms of engagement, DAU[s],” the reports says.

Elsewhere, the report accuses Roblox of being a haven for groomers and pedophiles due to its lack of “up-front screening to prevent them from joining the platform.” In one of its most serious accusations, the report claims to have found a group called “Adult Studios,” which has since been blocked, with 3,334 members openly trading child pornography and soliciting sexual acts.

Roblox’s response is an abject failure to address the two core allegations in our report, including:

1. Evidence that Roblox has been systematically lying for years about the number of people on its platform and their genuine level of engagement.

2. That the platform is a… https://t.co/Tj2KiANOnI

— Hindenburg Research (@HindenburgRes) October 8, 2024 A Roblox spokesperson called the report “misleading” in a statement to the Wall Street Journal and accused Hindenburg Research of having an agenda. “We firmly believe that Roblox is a safe and secure platform and in the financial metrics we report.”

Hindenburg Research responded by arguing that the company’s response failed to address the report’s core allegations. IGN has reached out to the Roblox Corporation for any further comment.

Many of the accusations within the report have been circulating for some time now. A 2023 class action lawsuit in California accused the Roblox Corporation of being misleading about “the efficacy of its filtering technologies and its ability to make the site safe and appropriate for children.” A 2021 report by YouTube channel People Make Games alleged that Roblox was exploiting child labor.

“Overall, we think Roblox has adopted the Silicon Valley approach of ‘growth at all costs’, whether by misleading or outright lying to investors about its key metrics or by opening its platform to dangerous
predators and illicit content unsuitable for children,” the report says, with the Hindenburg Group saying that it has taken a short position in shares for the Roblox corporation.

Kat Bailey is IGN’s News Director as well as co-host of Nintendo Voice Chat. Have a tip? Send her a DM at @the_katbot.