Nathan Anderson’s investment research firm Hindenburg Research released a new report on Thursday accusing the mobile payment company Block, which was formerly known as Square- of not thwarting fraud and crime on its P2P payment app.
Since Thursday, Block founded by Jack Dorsey has been making headlines as Hundernburg Research revealed that the cash app platform has around 75% fake accounts.
As per the latest reports, Block inflated its user growth to dodge revenue regulations. Since made, this accusation has ultimately triggered an investigation from the side of the Securities Exchange Commission (SEC).
According to Hindenburg, a few of the Block’s former employees have disclosed that around 40-75% of the app accounts were fake and involved in fraudulent activities. The research reports claim that those fake accounts were either made under non-existing names or were tied to a single person.
In addition to that, Hindenburg has also accused Block of opening fake accounts under the reputed names of Elon Musk and Donald Trump. Furthermore, the US-based short seller asserts that the American technology conglomerate embraced an underbanked division of the population of criminals.
Hindenburg finally added that the bad actors took advantage of the company’s unique approach and created multiple fake accounts and also indulged in other scams.
But according to Hindenburg, what astounded them the most was Block didn’t ban the users who were caught red-handedly getting engaged in fraudulent activities, but it only blacklisted them.
In connection with that, Hindenburg released a number of screenshots shared by one of the Block’s former customer care representatives that clearly depicts how the blacklisted accounts were regularly engaging in dozens of other suspected accounts.
In the statement made earlier on Thursday, the research corporation also highlighted the phenomenon of not blocking the blacklisted users from engaging in further activities. And it asserted that the very phenomenon was so common that often rappers boast about it in their hip-hop songs.
Within the research, Hindenburg required the Block to immediately elucidate the situation before its investors and disclose how many unique users are actually using their cash app at the moment. The research team is currently seeking an immediate response from a Block rep.
Following the accusation, a Block representative instantly appeared at the scene and dismissed it calling the statement “factually inaccurate.” Moreover, the source added that they were going to take an instant reaction against Hindenburg after complying with the SEC.
However, the current issue has adversely impacted Block’s stock price as it went down by 15% within the last 48 hours. But, by far, no legal actions have been taken by the authorities nor Block has been charged with any wrongdoing.
Before the issue was disclosed to the public, CEO Dorsey had proudly bragged about how the famous rappers were taking the name of their cash app in their hip-hop songs. Back then, he used it as evidence of the platform’s mainstream approach.
Although Hindenburg didn’t initially interfere in that situation, they have added that none of the rappers were singing about Cash App’s smooth running in their songs.
Earlier in March 2022, Block had announced in a public statement that it was being investigated by the Consumer Financial Protection Bureau based on the accounts of complaints received.
Toward the end of the reports, Hindenburg invited the public’s attention to a group of people named after Cash App, which the Baltimore officials charged with the distribution of a felony in 2021.
Not only that, but Hindenburg has also cited Cash App’s role in facilitating sex trafficking. It mentioned that several complaints were made to the Department of Justice that attempted to reveal the alleged true face of the public company.
This is not the odd case where an online platform is getting sued after allegations regarding it promoting sex trafficking.
Earlier this week, the owner of the Meta Platforms Mark Zuckerberg, and a few other executives and shareholders received major backlash for not reacting against sex trafficking taking place on platforms including Facebook and Instagram.
The alleged lawsuit was unanimously filed by the Meta shareholders such as the Employee’s Retirement System of the State of Rhode Island, Kiwi Investment Management Wholesale Core Global Fund, and the Teamsters Pension Fund.
As per the filing, Zuckerberg and his team were turning a blind eye to the exploitations occurring within the two popular social media platforms, and the lawsuit further professed that the authorities failed to ensure safety and protection for their platform users.
Even the complaint added that the authorities including the CEO ignored the systematic evidence put before them.