Shares in Yalla Group Ltd. (NYSE: YALA) slipped 4% Wednesday on allegations from Swan Street Research LLC, which claimed, among other things, the voice-chat app faked its user numbers.

In a recent financial report, Yalla Group said it served 5.8 million users in the first quarter of 2021 compared with 1.6 million a year ago. Management called the company's performance "stellar" at the time. However, Swan Street Research now alleges that the Chinese company, focusing on the Middle East and North Africa markets, inflated its MAUs by five times.

Swan Street listed several red flags in its 31-page report published Wednesday: "Too-good-to-be-true numbers that are irreconcilable with channel checks," history of fraud by company's auditors, new CFO, long distance between headquarters and accountants, and "cash stowed around the world."

The short seller said it talked to the former operations manager of Yalla and researched other data like SEMrush traffic, suggesting many accounts on Yalla are fake. The short seller found "negligible" mention of Yalla app in internet forums where its expected user base would be active. Further, the short seller claims Yalla overstated its revenues, estimating the company actually booked a third of its reported revenues.

Swan Street also found that the co-founder of Yalla, Xuecai Feng, managed a shell firm that ZTE used for illegal sales of U.S. technologies to Iran – which ultimately led to the fining and blacklisting of ZTE in the United States and ignited a tech war between Washington and Chinese techs under President Donald Trump.

"We believe that Yalla's financial statements are not credible," Swan Street wrote.

The short report pushed Yalla's shares to $17.56 per share intraday Wednesday. The company completed its public offering in New York in October 2020, raising $144.8 million including the partial exercise of the over-allotment option. Since the IPO price of $7.50, shares in the app have reached as high as $41.35 and as low as $6.26 per share.

YALA stock has been on a slide from nearly $27 per share in early April.