Hindenburg Drops Astonishing Details on Jack Dorsey’s Block, Payment Firm Fires Back
After a 2-year investigation, Hindenburg concluded Block (previously known as Square) “systematically took advantage of the demographics it claims to be helping.” The report accused the firm of facilitating “fraud against consumers and the government” as well as “avoiding regulation.” It further called Block’s loans and fees to be “predatory” in nature and designed to “mislead investors with inflated metrics.”
The US-based short seller said its research involved numerous interviews with former employees, partners, and industry experts, as well as an extensive review of regulatory and litigation records and FOIA and public records requests.
Hindenburg Report on Block
In a report released on March 23rd, Hindenburg claimed that Block “does not seem to offer a discernible edge” over its key rival platforms such as PayPal/Venmo, Zelle, or Apple. The report further said the company embraced non-compliance as a tactic to amplify its user base, capturing a very underbanked segment of the population – criminals.
Hindenburg added that more than a dozen of former CashApp employees admitted to the pressure from management, resulting in a disregard for Anti-Money Laundering (AML) and Know Your Customer (KYC) provisions. It further claimed Block allowed fraudulent accounts that facilitated scams to grow on Cash App, generating illegitimate revenue as well as inflating user metrics.
The report also stated that Jack Dorsey, who stepped down as the Twitter CEO in mid-2021, along with other Block insiders – James McKelvey, chief financial officer Amrita Ahuja, and Cash App manager Brian Grassadonia – sold over $1 billion of the company stock, whose price increased “on the back of its facilitation of fraud.”
“We also believe Jack Dorsey has built an empire—and amassed a $5 billion personal fortune—professing to care deeply about the demographics he is taking advantage of. With Dorsey and top executives already having sold over $1 billion in equity on Block’s meteoric pandemic run higher, they have ensured they will be fine, regardless of the outcome for everyone else.”
Accusations leveled against Block also involved boosting its revenue and user growth by facilitating billions of dollars of Pandemic-Relief fraud. It was this when the company shifted its focus to Cash App’s potential use in pandemic relief.
The report suggests that nearly 11 million people activated the direct deposit feature to receive stimulus and unemployment payments from the US government. While funds flooded to Cash App’s system, Block charged a hefty fee of 0.5% to 1.75% for speeding payments that would otherwise take 1-3 business days.
The report also stated that block turned a blind eye to the “obvious signs of fraud” despite receiving warnings from former employees as well as the government.
Block Responds
Block fired back at the short seller calling the report to be factually “inaccurate and misleading.” In its latest update, the firm revealed working with the US Securities and Exchange Commission (SEC) as well as exploring legal action against Hindenburg Research. It further claimed that the report is “designed to deceive and confuse investors.”
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