New York:Hindenburg Research has put out a report against Jack Dorsey-backed payments firm Block Inc., formerly known as Square Inc, saying a two-year investigation into the company concluded that it has "systematically taken advantage" of the demographics it claims to be helping. Jack Dorsey, the former head of Twitter, is co-founder and CEO of Block.
"The magic behind $SQ (Block) has not been innovation, but its willingness to mislead investors, facilitate fraud, avoid regulation and dress up predatory products as revolutionary tech," Hindenburg alleged in the report, published on Thursday. The Hindenburg report claimed its research involved dozens of interviews with former employees, partners, and industry experts, and an extensive review of regulatory and litigation records, among others.
The report also claimed Block "wildly overstated" genuine user counts and "understated" customer acquisition costs for years. "Former employees evidenced that many users have dozens, or even hundreds of accounts associated with them, vastly inflating user metrics," the report claimed. "Most analysts are excited about the post-pandemic surge of Block's Cash App platform, with expectations that its 51 million monthly transacting active users and low customer acquisition costs will drive high margin growth and serve as a future platform to offer new products."
Further, Block, according to the report, obfuscated how many unique individuals use Cash App, reporting misleading metrics on "transacting actives" which include duplicate accounts by the same user. Former employees, it claimed, estimated that 40-75 per cent of accounts they reviewed were fake, involved in fraud, or duplicates. Block shares slumped sharply after the allegations were levelled against it.