- Hindenburg Research has released a very compromising report about Jack Dorsey’s Block Inc.
- The report noted that Block inflates user metrics and facilitates fraud.
Block Inc, the Bitcoin (BTC) company founded by Jack Dorsey is under trouble following a recent report that was published by a short seller, Hindenburg Research. According to the report, Block was accused of facilitating fraud, and misleading investors and its insiders have cashed out almost $1 billion in illicit earnings.
The release of the report has weighed down the shares of the company which closed down by almost 20% since Hindenburg Research’s negative analysis of the firm. According to the details shared, the short seller said it conducted its investigation over the span of 2 years and that the facts it presented also came from insights gleaned from both old and current employees. A segment of the report reads:
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 accused Block of not adhering to robust KYC and compliance provisions, pitching its business as a hub for criminal activities that use the platform for money laundering. The report has it that even when an account is flagged for fraudulent activities, only such an account is banned and not the individual itself.
Hindenburg Research emphasized that it tested the solidity of Block’s compliance measures by registering two fake accounts using the names of former US President Donald Trump and Tesla CEO, Elon Musk. The firm said the registrations were successful and that a bank card was also requested for one of the accounts which was delivered by mail.
Block Denies Fraud Claims from Hindenburg Research
The claims Hindenburg Research made were so specific that it also involves the inflation of its active user metrics in a bid to drive up its performance outlook.
In a recent statement, Block Inc has come to debunk these claims, noting that it is a heavily regulated company that takes its compliance obligations very seriously.
We are a highly regulated public company with regular disclosures, and are confident in our products, reporting compliance programs, and controls. We will not be distracted by typical short-seller tactics.
Block said adding that it is working with the US SEC to y
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…explore legal action against Hindenburg Research for the factually inaccurate and misleading report they shared about our Cash App business today.
Block Inc is a major fintech giant that rivals the likes of Paypal and Revolut and is very well invested in Bitcoin development. From the championing of Bitcoin education programs to the launch of Bitcoin-powered Web5.0, the company has its footprints all over the crypto ecosystem, making the Hindenburg Research report a not-so-good one for the industry.
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