'Frictionless fraud': Hindenburg shorts Twitter co-founder Jack Dorsey's payments firm Block

Hindenburg Research on Thursday said it held short positions in Block Inc, alleging that the Jack Dorsey-led payments firm overstated its user counts and understated its customer acquisition costs, a Reuters report said.

Dorsey is Twitter’s co-founder.

“Our 2-year investigation has concluded that Block has systematically taken advantage of the demographics it claims to be helping,” the short seller said in a note published on its website, the report added.

NEW FROM US:

Block—How Inflated User Metrics and “Frictionless” Fraud Facilitation Enabled Insiders To Cash Out Over $1 Billionhttps://t.co/pScGE5QMnX $SQ

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— Hindenburg Research (@HindenburgRes) March 23, 2023

The US short-seller said that former Block employees estimated that 40%-75% of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual, Reuters reported.

Meanwhile, shares of Block fell 18% in premarket trading after the Hindenburg report.

What is Block?

The firm was founded by Jack Dorsey and Jim McKelvey in 2009. According to Bloomberg, it develops a payments platform aimed at small and medium businesses that allow them to accept credit card payments and use tablet computers as payment registers for a point-of-sale system.

With inputs from agencies

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