After Adani, Hindenburg Research Targets Twitter Co-Founder Jack Dorsey's Payment App 'Block'; Firm Shares Crash

Hindenburg Research in its latest report, which is released on Thursday, has alleged Twitter co-founder Jack Dorsey's payment app Block for facilitating fraud against consumers and government.

New Delhi: The short-seller Hindenburg Research in its latest report has alleged Twitter co-founder Jack Dorsey’s payment company Block (erstwhile known as Square Inc.) for “facilitating fraud against consumers and government, avoiding regulation, dressing up predatory loans and misleading investors”. The company Block’s shares tank by over 18% after short-seller Hindenburg Research announced the payment company was its latest short position.

“Our 2-year investigation has concluded that Block has systematically taken advantage of the demographics it claims to be helping. The “magic” behind Block’s business has not been disruptive innovation, but rather the company’s willingness to facilitate fraud against consumers and the government, avoid regulation, dress up predatory loans and fees as revolutionary technology, and mislead investors with inflated metrics,” Hindenburg Research wrote in its latest report.

The report further said that “even when users were caught engaging in fraud or other prohibited activity, Block blacklisted the account without banning the user”. The report mentioned that a former customer service rep had shared screenshots showing how blacklisted accounts were regularly associated with dozens or hundreds of other active accounts suspected of fraud.  

NEW FROM US:

Block—How Inflated User Metrics and "Frictionless" Fraud Facilitation Enabled Insiders To Cash Out Over $1 Billionhttps://t.co/pScGE5QMnX $SQ
  — Hindenburg Research (@HindenburgRes) March 23, 2023

The report said Block’s Cash App thrived on serving “unbanked“ customers. It also alleges those unbanked customers were involved in criminal or illicit activity.

What is Jack Dorsey’s fin-tech Block?

Twitter co-founder Jack Dorsey started the payment company with the name of Square back then in 2009 with the disruptive idea: a tiny card reader that could plug into a smartphone’s headphone jack to easily enable to make the credit card payments between payers and vendors.

“In 2013, a month following PayPal’s acquisition of Venmo, Block launched Square Cash, later rebranded Cash App. It aimed to compete with Venmo by providing financial services to consumers, starting with a peer-to-peer mobile app where users could send and receive money,” the report mentioned.

“In 2017, Block expanded toward more traditional banking by introducing the “Cash Card,” a prepaid debit card allowing users to transact outside of their virtual Cash App wallet. In 2018, following bitcoin’s spike in price and popularity, Cash App allowed users to move funds in their Cash App wallet into Bitcoin,”it added.