The best short call of 2023 wasn’t made by a ruthless hedge fund, a well-known activist firm, or any of the liveliest voices on the sell side. It was made by a first-year medical resident running a blog named after a SpongeBob SquarePants character.

James Block is a physician at one of America’s top hospitals, but between shifts he moonlights as an amateur financial sleuth and writer. His personal mission: expose the cryptocurrency market for being what he describes as “a semi-decentralized pyramid scheme.”

Plenty would dispute that characterization, and his quest looks increasingly like an uphill battle following the US approval of spot Bitcoin ETFs this month. Yet the 31-year-old hobbyist has won notable victories — including last year’s best bearish call.

Block (no relation to famous short seller Carson Block) stumbled onto Signature Bank during his investigations in the crypto world. The regional lender was doing big business with companies in the industry, working with multiple characters he considered suspect and with huge exposure to questionable digital assets.

“I saw just how careless they were being with who they were doing business with, with the amount of money that they were holding, the amount of uninsured deposits they had,” Block says from his home office near Ann Arbor, Michigan.

That spurred him to publish a damning critique of Signature on his blog, Dirty Bubble Media, on Jan. 10, 2023. A little over two months later the lender was shut down, becoming at the time the third-largest bank failure in US history.

Signature’s demise came amid a broader US banking crisis that began with a run on Silicon Valley Bank, and given the worries surrounding the industry it’s unlikely Block was the only person to spot trouble brewing. But he was one of the few to publish concerns focused on Signature specifically, and the subsequent 100% wipeout in its shares made Dirty Bubble’s bearish call the best of the year, according to Breakout Point, an analytics firm that tracks short-selling campaigns.

That puts Block atop a list that includes the likes of Nate Anderson’s Hindenburg Research and Fraser Perring’s Viceroy Research.

FTX Takedown
With a subscriber base of about 20,000, the Dirty Bubble Media blog has little of the clout enjoyed by more famous short sellers, who can often send a stock spiraling the instant they publish research. But Block’s one-man campaign to “destroy these frauds” in the digital asset space has attracted influential readers including hedge funds and even regulators, he says.

Many of those were won after he helped expose fraud at Sam Bankman-Fried’s cryptocurrency exchange FTX and trading firm Alameda Research. The Dirty Bubble post “Is Alameda Research Insolvent?”, in which Block patiently explained the likely scam underway, was a viral hit in the days leading up to the collapse of both firms.

First « 1 2 » Next