Was attacked by the professional short-selling agency Hindenburg, and Block could not escape?

This article comes from Decrypt, the original author: Stacy Elliott, compiled by Odaily translator Katie Koo.

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Jack Dorsey is the CEO of Block, the parent company of Square, and a big believer in Bitcoin.

In the report’s disclaimer, Hindenburg noted that it was shorting Block’s stock. Hindenburg has "snapped" about 30 companies so far in 2020, and the stocks of these companies fell by an average of about 15% the day after their reports were released, and by an average of 26% six months later. And Block is becoming its next "new prey."

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Block's Response to "Short Selling Report"

Block published a report early Thursday afternoonstatementstatement

"The Hindenburg is known for these types of attacks simply to allow short sellers to profit from falling stock prices," Block wrote in a statement. "We reviewed the full report against our own data and believe it was designed to defraud and confuse investors.” The statement continued: “We are a highly regulated public company with regular disclosures and confidence in our products, reporting, compliance programs and controls. We will not be typically shorted interfered with by strategy.”

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Block exaggerates real user numbers

Hindenburg said former Block employees told investigators that the company "grossly inflated" its user numbers by 75 percent and deliberately relied on a "wild west-style compliance approach" to lure people who created accounts for identity fraud and other scams. bad elements.

Cash App has 51 million active users, up 16% from 2021, Block said in its 2022 annual report last month.

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Block Ignores Compliance Issues

The report argues that when the COVID-19 pandemic threatened revenue from its merchant point-of-sale services, Block "suppressed internal concerns and ignored user pleas for help at a time when criminal activity and fraud were rampant on its platform."

In its 2019 annual report, Block (then still known as Square) reported total net revenue of $4.7 billion. According to a filing with the U.S. Securities and Exchange Commission (SEC), 65 percent of that came from transaction fees, 22 percent from subscription and software businesses, 2 percent from hardware like Square Terminal, and the rest from bitcoin.

The Hindenburg report said Block's Cash App grew so quickly because it was being used to defraud COVID-19 relief payments and because the company ignored inquiries from federal and state law enforcement. "In order to preserve its growth engine, Cash App ignored internal employee concerns, as well as warnings from the Secret Service, U.S. Department of Labor OIG, FinCEN, and state regulators, all of which made it clear that many Having a COVID-19 relief payment going into the same account is a clear sign of fraud."

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Hindenburg "bombards" Block key figures

The report was particularly harsh on Jack Dorsey. In 2020, Dorsey commented on Cash App's popularity in pop music. References to Cash Apps in pop culture are already ubiquitous, but in a 2022 paper it states: "While Cash Apps allow participants the flexibility to schedule transactions anywhere, it introduces hidden fees and social media gamification strategies , forcing them to take unnecessary financial risks (such as entering lotteries).”

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Hindenburg is a professional "short seller"

It is worth noting that this 17,000-word "short report" only mentioned Bitcoin twice, that is, Block has allowed users to use Cash App accounts for Bitcoin transactions since 2018. The main focus of the Hindenburg report is how Block is supporting its business during the pandemic.