Wolfpack Research has disclosed a short position in B. Riley Financial, arguing the boutique investment bank is overleveraged and faces a deteriorating book of loans, especially loans to the cryptocurrency sector.

“We see [B. Riley] as a lender of last resort for the dregs of the public market,” Wolfpack stated in its short report released Wednesday. “As financial conditions have contracted, [B. Riley] has not sobered up and cut its losses on failing investments, instead it has extended its distressed clients more capital so that it can pretend that better times are just around the corner.”

The short seller argued that B. Riley’s total cash and investments, net of debt, fell by $950 million to negative $350 million in 2022 and predicting the firm will record investment losses of up to $700 million in 2023. The shortfalls could put B. Riley’s dividend at risk and potentially triggering its collapse, Wolfpack claimed.

B. Riley did not respond to a request for comment as of publication.

In particular, the short highlighted B. Riley’s exposure to the cryptocurrency sector. It noted the investment bank’s failed effort to save Bitcoin miner Core Scientific in December, which left the firm with $42 million worth of underperforming loans.

B. Riley Financial stock was quoted at $39.81 per share in afternoon trade Wednesday, down 9.7%.