Short Seller Hindenburg Hammers Block, Says Fintech has Embraced One Underbanked Segment – “Criminals”

Shares of Block (NYSE:SQ), formerly Square, are plunging in pre-market trading following the release of a report by Hindenburg Research, a noted short seller.

Hindenburg is not kind in its assessment of the Fintech, stating their 2-year investigation has concluded that Block has taken advantage of the group it claims to be helping as the company facilitates fraud against consumers, avoids regulation, and offers predatory loans and fees while misleading investors.

To quote the report:

Core to the issue is that Block has embraced one traditionally very “underbanked” segment of the population: criminals. The company’s “Wild West” approach to compliance made it easy for bad actors to mass-create accounts for identity fraud and other scams, then extract stolen funds quickly.” [emphasis added]

Citing sources of former employees and partners, Hindenburg claims that Block “wildly overstated” user counts while understating acquisition costs. The report alleges, “former employees estimated that 40%-75% of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual.”

Pointing a finger at Block’s Cash App, the report claims that it is the top app used for sex trafficking in the US, adding there is even a gang in Baltimore named “Cash App.”

Testing their thesis, Hinderburg reports that it turned its own accounts into Donald Trump and Elon Musk and easily transferred funds – unscathed by any KYC or AML protocols.

The report states that Cash App has ignored internal employee concerns, having received warnings from the Secret Service, FinCEN, State Regulators and more.

Insult to injury, Hindenburg has made a gangsta Cash App video lambasting its usage by criminals.

The report is viewable here.

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