Short Seller Accuses SenseTime of ‘Revenue Round-Tripping’

In a new development that could add to the ongoing challenges facing SenseTime, the US-based short seller group Grizzly Research has leveled serious accusations against the Hong Kong-based artificial intelligence company. In a recent report, Grizzly Research alleges that SenseTime engaged in “revenue round-tripping,” a practice where a company provides funds to its customers to purchase its own products or services, artificially inflating its revenue. The report also cites two court cases to support these claims. SenseTime, however, has dismissed the allegations, stating they are “without merit”.

Founded in 2014, SenseTime has rapidly emerged as a global leader in AI technology, particularly in the realm of facial recognition. The company’s advanced deep learning algorithms and computer vision technology have applications in various sectors, including security, finance, and healthcare. Despite its technological prowess and high valuation, SenseTime has not been without controversy, particularly regarding its facial recognition technology.

One of the most significant challenges for SenseTime came when it found itself on a US government sanctions list. The situation surrounding SenseTime’s addition to the US government’s blacklist dates back to October 2019, when the US Department of Commerce specifically listed SenseTime on its Entity List. This significant move was part of a broader action by the US government targeting several Chinese technology firms over human rights concerns.

The primary reason cited for SenseTime’s inclusion was its alleged role in the development and deployment of technology used in the surveillance and mass detention of Uighurs and other predominantly Muslim ethnic minorities in the Xinjiang Uyghur Autonomous Region of China. The US government expressed serious concerns that the facial recognition technology provided by SenseTime was being used to facilitate these activities, which have been described by many international observers as human rights abuses.

The inclusion on the Entity List restricts SenseTime from obtaining some US-origin technology and components without government approval, presenting significant challenges to its operational capabilities and international business partnerships.

Adding to these challenges, Grizzly Research’s report argues that SenseTime lacks a “competitive moat” in the AI sector. The report further claims that the company is operating a “fundamentally dead-ended facial recognition software business.” This assertion points to the growing global scrutiny and regulatory challenges facing facial recognition technology, particularly in Western markets where privacy and ethical concerns are increasingly leading to stricter regulations.

Source: CNBC

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November 29, 2023 – by the FindBiometrics Editorial Team