Hindenburg Research claims fraud in Jack Dorsey-led payments firm Block Inc

PTC Web Desk: Hindenburg Research has released another report, this time on Twitter co-founder Jack Dorsey's payments firm Block Inc, earlier known as Square. It has accused the company of facilitating fraud against consumers and government and misleading investors.  Block Inc has market capitalisation of nearly $44 billion.

Hindenburg Research on Thursday alleged that the Jack Dorsey-led payments firm 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 short seller said in a note published on its website.

"We think Block has misled investors on key metrics, and embraced predatory offerings and compliance worst-practices in order to fuel growth and profit from facilitation of fraud against consumers and the government, "it added.

Meanwhile, the shares of Block fell 18 per cent in premarket trading after the report.

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 claims that their research involved several interviews with former employees, partners, and industry experts, extensive review of regulatory and litigation records, and FOIA and public records requests. 

Hindenburg Research, a forensic financial research firm, was founded in 2017 by Nathan Anderson. It analyses equity, credit and derivatives. It has a track-record of finding corporate wrongdoings and placing bets against the companies.

Earlier, it head the headlines over its revelations about Gautam Adani group.  The report accused Adani group of stock manipulation, and improper use of tax havens.


(Compiled with inputs from Reuters and agencies)