Block Inc, co-founder Jack Dorsey suffered a net worth tumble of 526 million US dollars following the latest report from Hindenburg Research, an investment research firm.
The New York-based research firm after a private investigation alleged that Block Inc has been inflating the user metrics and hiding the fact that the company’s stock has a downside of up to 65 percent to 75 percent. This downside is based solely on the fundamentals.
The allegations about the user metrics inflation stated that the user numbers were unreal and artificial, which facilitates fraudulent transactions. It further said that these false numbers were an attempt to cater to criminals including those who conspire in sex trafficking.
The report contained another allegation that about 40 percent to 75 percent of accounts on Block were fake. These accounts were viewed as either completely fraudulent and made up or were multiple accounts in the name of a single user.
Hindenburg has found that the platform of Block has many accounts in the name of Jack Dorsey. More than one account was present in the names of persons such as Donald Trump, the former president of the United States of America, and Elon Musk, the founder of Tesla, and the current CEO of Twitter.
The research firm moved ahead to collect additional proof for the claims. Hindenburg created a fake account in the name of Donald J Trump and ordered a debit card. Surprisingly, the debit card was delivered to the address and the photo of the same has been shared on the official Twitter handle of Hindenburg.
Block’s money transfer app by the name Cash was found by Hindenburg of posing as a platform that aids transactions in support of crime rates. The report cites that the actual individual under the fake name could be anyone including criminals, or any wanted persons.
Cash App has been in controversial news previously in 2022 when it was found as the medium that a man used to carry out transactions on his act of selling videos of minors victimized for inappropriate and offensive acts.
The man was caught as the whole deal was a plot to bring him under action set by an undercover law enforcement officer. Cash has been accused several times as the commonly used platform for illegal acts of sex trafficking in the U.S.
The Hindenburg reports have a separate section on the Cash App that tells the way former employees described how Cash App suppressed internal concerns and ignored user pleas for help as criminal activity and fraud ran rampant on its platform without any kind of control.
The section further read that the ignorance of the internal concerns and user pleas was in an effort to grow Cash App’s user base by strategically disregarding the Anti Money Laundering (AML) rules.
Following the events, Block Inc released a statement that said the findings on the Cash App by Hindenburg report were factually incorrect and misleading.
The statement read that Block intends to work with the Securities and Exchanges Commission (SEC) of the U.S. to explore legal action against the Hindenburg Research Firm.
The statement continued that Hindenburg was known for these types of attacks and it has been designed solely to allow short sellers to profit from a declined stock price.
It also stated that Block has reviewed the entire report in light of its own data and has concluded that it is intended to mislead and confuse investors.
Block Inc firmly stated that it was a highly regulated company that operates by regular disclosures and that it was more than confident in its products, reporting, compliance programs, and controls.
The company has a long history of operating with integrity and complying with all applicable laws and regulations. It added that the company would not be distracted by typical short-seller tactics.
Also Read:- ‘Criminal Activity And Fraud Run Rampant’ On Cash App, Report Claims
What Is Hindenburg?
Hindenburg Research LLC is an investigation company that was founded by Nathan Anderson in 2017 with its concentration on activist short selling. Activist short selling is where the investor will profit when the value of an asset falls.
The firm takes more than six months of time to conduct a private investigation on a certain company by analyzing the public records and internal corporate documents of the company. It will meet the employees and former employees of the company to collect internal resources.
This report is first shared with the selected partners of the firm who will proceed to take short positions in the company. Then the report will be released, which will lead to a fall in the share and stock prices of the company.
Companies That Suffered From Hindenburg Reports
- Block Inc – American multinational tech conglomerate focusing on financial services, mobile payment, and point of sale
- Adani Group – Indian multinational conglomerate having businesses in renewable energy, natural gas, electric power generation and transmission, port management, airport operations, food processing, mining, and infrastructure
- Nikola Corporation – American manufacturer company that focuses on heavy-duty commercial battery-electric vehicles, energy solutions, and fuel-cell electric vehicles.
- Clover Health Investments Corp – American healthcare company
- Lordstown Motors – American EV automaker company
- Kandi – Chinese battery and EV manufacturer
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