Block Is Struggling After The Fraud Accusations
Following the release of the research, Block shares fell by 17% in premarket trading on the New York Stock Exchange (NYSE) from its previous close of $72.65.
Block deceived the market about the true number of consumers and used predatory offers to accelerate growth during the Covid-19 epidemic. In a research issued on Thursday, the notorious short-selling firm Hindenburg Research targeted Block, the startup of former Twitter CEO Jack Dorsey, accusing the company of fraud, abusive activities, and artificially boosting the number of subscribers.
“In essence, we believe Block deceived investors on key metrics, engaged in predatory bidding, and engaged in the worst compliance practices to drive expansion and profit from assisting fraud against customers and the government,” Hindenburg stated.
Block’s Shares Fell by 17%
Following the release of the research, Block shares fell by 17% in premarket trading on the New York Stock Exchange (NYSE) from its previous close of $72.65. As markets reopened, the stock fell below $58, its lowest level since the beginning of the year, before rising somewhat to approximately $63 in the afternoon.
Hindenburg asserts that former Block employees told its investigators that the corporation “wildly exaggerated” the user count of its services by up to 75% and that it deliberately relies on an “Old West approach” to compliance to entice malicious individuals to set up accounts in bulk to carry out fraud and other scams.
Hindenburg is Making Harsh Statements About Block
Block is also accused of blacklisting individual accounts that committed fraud while forgetting to include individuals who had registered hundreds of additional accounts that they were reportedly utilizing for illegal purposes.
According to Hindenburg, the company tested how simple it would be for a user to establish accounts in someone else’s name by renaming two accounts “Donald Trump” and “Elon Musk.” Block claimed in its 2022 annual report that its Cash App service had 51 million active users, a 16% rise from 2021.
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