(Reuters) - Buy now, pay later firm Sezzle's ( SEZL ) shares plunged on Wednesday after Hindenburg Research disclosed a short position, citing risky lending practices alongside a decline in customers and merchants.

Sezzle's ( SEZL ) stock, which has gained over 1,000% so far this year, fell as much as 28.6% to $225 earlier in the session, before paring some losses. It was last trading 14% lower.

"Our findings show Sezzle ( SEZL ) is borrowing expensive capital to make extremely risky loans through a struggling platform that is rapidly losing customers and merchants," the short seller said.

Hindenburg, which was behind an over $100 billion market rout in India's Adani Group and had also taken aim at Jack Dorsey-led Block, added Sezzle ( SEZL ) insiders have been selling stock or cashing out through a massive margin loan.

Sezzle ( SEZL ) did not immediately respond to a Reuters request for comment. Reuters could not independently confirm the claims of the Hindenburg report.

BNPL is a financing option that allows consumers to make purchases and pay for them over time, typically in a series of installments. It exploded in popularity in 2020 after the COVID-19 pandemic forced more shoppers online.

As most BNPL providers do not report their loans to the credit reporting agencies, there is scant data regarding delinquencies.

In November, Sezzle ( SEZL ) reported Underlying Merchant Sales were up 40.6% year-over-year for the quarter ended Sept. 30.

It also raised its forecast for full-year adjusted profit and revenue growth.

Founded in 2017 by Nathan Anderson, Hindenburg is a forensic financial research firm that analyses equity, credit and derivatives.

Hindenburg invests its own capital and takes short positions against companies. After finding potential wrongdoings, the company usually publishes a report explaining the case and bets against the target company in the hopes of making a profit.

Short sellers typically sell borrowed securities and aim to buy these back at a lower price.