Carson Block Is Increasingly Concerned With A Whistleblower Case Snap Faces

Muddy Waters' Carson Block is one of the most notable short-seller investors and appears to be building a case against Snap Inc SNAP. By his own admission in late May, he isn't short Snap's stock "but might be" in the future if the company doesn't address his concerns.

Block doubled down on his comments during a Bloomberg interview Monday evening with a focus on an ongoing whistleblower dispute in which a former employee alleges Snap actively deceived the investment community by overstating user metrics in the past.

While many investors are dismissing the case as being merely a disgruntled employee looking to gain some spotlight, this may be far from the case, Carson said. Specifically, Carson completed a "decent amount of diligence" on the topic and found that the ex-employee is a "pretty stand-up person who has a lot of credibility."

As such, it would be a mistake for long investors to dismiss these allegations. Other investors would argue that if the allegations are true, it occurred at a much earlier stage in the company's life before it was a public company.

Carson doesn't see it this way.

"If these allegations are true you are looking at a management team that has been massively rewarded for doing the wrong things and those zebras very seldom change their stripes," he said.

Snap's stock is down about 17 percent since going public on March 3.

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