On January 28, 2026, Gotham City Research released a note accusing Carvana of inflating its 2023‑2024 earnings by more than $1 billion through undisclosed related‑party transactions with companies controlled by CEO Ernest Garcia II. The note points to DriveTime Automotive Group, Bridgecrest Acceptance Corp., and GoFi as the entities involved.
The report alleges that Carvana’s adjusted EBITDA was heavily propped up by debt and cash flows from these entities. DriveTime reported operating and free cash flow deficits totaling over $900 million during 2023‑2024, while Carvana recorded a $755 million gain on loan sales in 2024. Gotham argues that the gain was achieved by selling loans to DriveTime at inflated prices, effectively shifting profits to the related parties. Bridgecrest’s servicing fee of 0.117% per year and GoFi’s circular flows with DriveTime are cited as additional mechanisms that may have inflated reported profitability.
Carvana has denied the allegations, stating that all related‑party transactions are fully disclosed and comply with accounting standards. In a statement, the company emphasized that the related parties are independent and that the transactions were conducted at arm’s‑length terms. The company also highlighted that its 2023‑2024 net income totaled approximately $550 million, a figure that the short‑seller claims is overstated by more than $1 billion.
The report has intensified scrutiny from investors and regulators. Analysts have noted that the allegations raise questions about the quality of Carvana’s earnings and the sustainability of its business model, which relies heavily on financing and loan sales to related parties. Some analysts, including JPMorgan and Wells Fargo, have maintained a bullish stance, arguing that Carvana’s operational efficiencies and unit growth offset the concerns, while others echo Hindenburg’s earlier warnings about potential restatements and auditor independence issues.
If the allegations are substantiated, Carvana could face restatements of its 2023‑2024 financials, delays in its 2025 10‑K filing, and increased regulatory scrutiny. The company’s auditor, Grant Thornton, has been highlighted as a potential conflict of interest due to its ties to both Carvana and DriveTime. The situation underscores the importance of transparent related‑party disclosures and robust internal controls.
Investors will be watching Carvana’s forthcoming earnings releases and any regulatory filings for confirmation of the allegations. The company’s ability to maintain profitability without relying on related‑party financing will be a key factor in assessing its long‑term viability.
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