Hindenburg targets Jack Dorsey's payments firm Block: All we know so far

Short-seller Hindenburg Research has yet again come out with a report saying that Block Inc has willingly facilitated fraud against consumers and governments.

Block Inc was founded by entrepreneur Jack Dorsey and it offers payment and mobile banking services for merchants and consumers. The company, formed in 2009 was known as Square, came up with a disruptive idea. It used a tiny card reader that could plug into a smartphone’s headphone jack to easily enable artists and vendors to take credit card payments.

Hindenburg, in its blog said, "Our 2-year investigation has concluded that Block has systematically taken advantage of the demographics it claims to be helping. The “magic” behind Block’s business has not been disruptive innovation, but rather the company’s willingness to facilitate fraud against consumers and the government, avoid regulation, dress up predatory loans and fees as revolutionary technology, and mislead investors with inflated metrics."

The blogpost further states that Block Inc wildly overstated its genuine user counts and understated its customer acquisition costs. Former employees estimated that 40 per cent to 75 per cent of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual.

The report claims that Block thrived on the "unbanked" customers. However, the report adds on, that most of the “underbanked” customers were either criminals or people involved in illicit activities. "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", the report said.

Findings of the report

• Block systematically took advantage of the demographics it claims to be helping. 
• The “magic” behind Block’s business is the company’s willingness to facilitate fraud against consumers and the government, avoid regulation, dress up predatory loans and fees as revolutionary technology, and mislead investors with inflated metrics.
• Block wildly overstated its genuine user counts and has understated its customer acquisition costs. 
• Former employees estimated that 40 per cent to 75 per cent of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual.
• Block has embraced one traditionally very “underbanked” segment of the population: criminals.
• Even when users were caught engaging in fraud or other prohibited activity, Block blacklisted the account without banning the user. 
• Cash App was also cited “by far” as the top app used in reported US sex trafficking. 
• The platform has been overrun with scam accounts and fake users, according to numerous interviews with former employees.