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Jack Dorsey loses $526 million in a single day after Hindenburg publishes report alleging fraud in Block Inc

Hindenburg report claims that Block obfuscates the number of users on the Cash App platform by submitting false "transacting active" metrics that contain duplicate and fictitious accounts.

Hindenburg Research on Thursday released a report on Block Inc., formerly known as Square Inc., which is a $44 billion market cap company that claims to have developed a “frictionless” and “magical” financial technology with a mission to empower the “unbanked” and the “underbanked”. The Publishing of the report was bad news for Jack Dorsey as it led to a dip in his net worth.

According to Bloomberg, Dorsey lost wealth amounting to $526 million in a span of one day.

Jack Jorsey’s wealth plummeted by $526 million after the short seller published its report. His net worth now stands at $4.4 billion after an 11 per cent fall.

Hindenburg’s 2-year investigation into Block.Inc claimed 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 a revolutionary technology, and mislead investors with inflated metrics.

The report says “CEO Jack Dorsey has publicly touted how Cash App is mentioned in hundreds of hip-hop songs as evidence of its mainstream appeal. A review of those songs shows that the artists are not generally rapping about Cash App’s smooth user interface—many describe using it to scam, traffic drugs or even pay for murder”.

The report further claims, “Beyond facilitating payments for criminal activity, the platform has been overrun with scam accounts and fake users, according to numerous interviews with former employees.

Examples of obvious distortions abound: “Jack Dorsey” has multiple fake accounts, including some that appear aimed at scamming Cash App users.  “Elon Musk” and “Donald Trump” have dozens.

To test this, we turned our accounts into “Donald Trump” and “Elon Musk” and were easily able to send and receive money. We ordered a Cash Card under our obviously fake Donald Trump account, checking to see if Cash App’s compliance would take issue—the card promptly arrived in the mail.”

Former Block employees estimated that 40%–75% of the accounts they reviewed were fake, involved in fraud, or additional accounts linked to a single person, according to the US short-seller, who was responsible for a market cap collapse of over $100 billion for India’s Adani Group.

Hindenburg report claims that Block obfuscates the number of users on the Cash App platform by submitting false “transacting active” metrics that contain duplicate and fictitious accounts. Hinderburg added that as the company’s stock price soared during the pandemic, co-founders Jack Dorsey and James McKelvey collectively sold over $1 billion of stock. The report also stated that other executives, including the head of finance Amrita Ahuja and the lead manager for Cash App Brian Grassadonia, sold millions of dollars worth of stock.

In sum, the Hindenburg report claims that Block has misled investors on key metrics, and embraced predatory offerings and practices in order to fuel growth and profit from the facilitation of fraud against consumers and the government.

The report states that Jack Dorsey has built an empire and amassed a $5 billion personal fortune—professing to care deeply about the demographics he is taking advantage of. With Dorsey and top executives already having sold over $1 billion in equity on Block’s meteoric pandemic run higher, they have ensured they will be fine, regardless of the outcome for everyone else.

Ayodhra Ram Mandir special coverage by OpIndia

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OpIndia Staff
OpIndia Staffhttps://www.opindia.com
Staff reporter at OpIndia

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