Hindenburg Research claimed fraud in Jack Dorsey-led payments firm Block Inc, saying the company overstated its user counts and understated its customer acquisition costs. “Our 2-year investigation has concluded that Block has systematically taken advantage of the demographics it claims to be helping,” the US-based short seller said.
Shares of Block fell 13 per cent in pre-market trading after the report.
In a report titled “Block — How Inflated User Metrics and ‘Frictionless’ Fraud Facilitation Enabled Insiders To Cash Out Over $1 Billion”, Hindenburg claimed that former Block employees estimated that 40%-75% of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual.
“Block, formerly known as Square, is a $44 billion market cap company that claims to have developed a frictionless and magical financial technology with a mission to empower the unbanked and the underbanked,” the report said.
“The magic behind Square has not been innovation, but its willingness to mislead investors, facilitate fraud, avoid regulation and dress up predatory products as revolutionary tech,” it further said.
READ | What Is Hindenburg Research? US-Based Short Seller That Accused 16 Firms, Before Adani, Of Fraud
The New York-based forensic financial research firm grabbed the spotlight in India earlier this year after it published a damning report titled “Adani Group: How The World’s 3rd Richest Man Is Pulling The Largest Con In Corporate History”.
In the report, Hindenburg accused Indian conglomerate Adani Group of brazen stock manipulation and accounting fraud. Following the report, Adani lost his throne as Asia’s and India’s richest, with the fallout wiping out more than $150 billion from Adani Group’s market value since January 24.
