dLocal DLO
DLO's refusal to reconcile 2020 cash flows in writing, while verbally denying misuse on broker calls, confirms Muddy Waters' view that client funds financed the pre-IPO special dividend.
Thesis
This follow-up note from Muddy Waters reinforces its earlier fraud thesis on dLocal (DLO) after management declined to respond in writing to the initial report. DLO has instead held verbal-only conference calls with clients of Morgan Stanley, JP Morgan, Citigroup and Goldman Sachs, where it claimed client funds were always segregated from proprietary cash. Muddy Waters counters that DLO's 2020 consolidated cash flow does not reconcile: a $3.3 million deficit at the consolidated level (potentially as high as $10.4 million once $7.1 million of net financial-asset collections is accounted for) and a $4.1 million deficit at the Malta subsidiary. Because DLO holds significant third-party client funds on balance sheet, any uses exceeding sources implies client money funded the $15 million special dividend to pre-IPO shareholders. Block argues the refusal to put a testable explanation in writing is itself an admission of guilt.
SCQA
dLocal is a cross-border payments processor that holds large amounts of third-party client funds on its balance sheet at all times, listed via IPO after paying a $15 million special dividend to pre-IPO shareholders in 2020.
DLO's 2020 consolidated cash flow does not reconcile — a deficit of $3.3mm to $10.4mm plus a $4.1mm deficit at its Malta subsidiary — yet management refuses to address the discrepancy in writing, only making verbal denials on broker calls.
DLO must publish a written, testable reconciliation of its 2020 cash flows showing client versus company funds, and substantively address in writing the other indicia of fraud raised in Muddy Waters' initial report.
No explicit price target is provided; the implied payoff is vindication of the short thesis and further downside in DLO equity as fraud concerns around misuse of client funds are confirmed rather than rebutted.
The three reasons
- 1
2020 consolidated cash flow fails to reconcile — up to $10.4mm deficit funding the $15mm special dividend
- 2
Malta subsidiary shows a $4.1mm cash flow deficit, implying client funds were tapped
- 3
DLO refuses to put denials in writing, only non-substantive verbal responses on broker calls
Primary demands
- dLocal must provide a detailed written explanation reconciling its 2020 cash flows
- Address in writing the multiple indicia of fraud raised in the initial report rather than via non-substantive broker calls
KPIs cited
Pattern membership
Where this document fits across the library's 12 rhetorical / structural patterns.
Notable slides (1)
Notes
Three-page text-only follow-up memo to Muddy Waters' initial DLO fraud report. Page 1 is boilerplate Terms of Use with the MW logo; pages 2-3 are the actual argument, formatted as a Word-style memo with no charts, tables, or branding. Rhetorical device of the piece: treating management's refusal to put denials in writing as itself evidence of guilt, supported by a verbatim quote from DLO's JP Morgan broker call ('always segregated clients' funds from proprietary, never had deficit even before IPO') that MW frames as contradicting the reconciled cash-flow math. No named villain — critique stays at the entity/management level. Signed by Carson Block on the cover as Director of Research.