Investing.com -- FTAI Aviation (NASDAQ: FTAI) stock fell 5% following a report by Muddy Waters (NYSE: WAT ) Research that raised concerns about the company potentially violating U.S. sanctions against Iran. The report, which mentioned FTAI cautiously again, suggests that an Iranian entity may have acquired FTAI products in apparent violation of sanctions.

Muddy Waters’ investigation highlighted evidence from LinkedIn posts by an Iranian airline executive, revealing CFM-56 engines and FTAI packaging in Iran. The findings suggest that FTAI’s Aerospace Products business could be implicated in sanctions violations, as strict liability applies to such breaches according to U.S. OFAC regulations. The severity of repercussions for FTAI could be significant, potentially including prison time, depending on the level of culpability and frequency of violations.

The evidence from LinkedIn, corroborated by landmarks visible in Google (NASDAQ: GOOGL ) Earth imagery, indicates that the parts are indeed in Iran, raising serious questions about FTAI’s compliance with sanctions. A U.S. law firm specializing in OFAC practice has indicated that the situation could be problematic for FTAI, as even indirect provision of prohibited parts through third parties constitutes a violation.

This report follows Muddy Waters’ initial short report on January 15, which accused FTAI of misleading financial reporting. Muddy Waters claims that FTAI’s reported revenue from maintenance and module sales is substantially lower than stated, alleging that the company has misrepresented engine sales as MRO revenue in its Aerospace Products segment. According to Muddy Waters, a significant portion of the segment’s adjusted EBITDA may come from gains on whole engine sales, which they believe is designed to inflate the company’s valuation beyond that of a typical leasing business.

The market’s reaction to these allegations has led to a notable decline in FTAI’s stock price, reflecting investor concern over the potential legal and financial implications of the findings presented by Muddy Waters Research.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.