Shares in Afterpay parent company Block have crashed by more than 16 per cent today on the ASX, following a damning report from Hindenburg Research.
The report, which the company says is the result on two-years of research, claims between 40-75 per cent of accounts on the Block platform were either fake, or involved in fraud.
It cites former workers, who claim “criminal activity and fraud running rampant on its platform”, and that its Cash App platform — not available in Australia — was “filled with fake and duplicate accounts.”
The report claims Cash App has a number of security flaws that make fraud easy, including allowing single accounts to receive unemployment benefits from a number of people, and allowing a Hindenburg employee to successfully obtain a Cash App card through the mail by opening an “obviously fake Donald Trump account”, as well as another in Elon Musk’s name.
“Massachusetts sought to claw back over 69,000 unemployment payments from Cash App accounts just four months into the pandemic,” the report notes, of the high fraud levels on the platform.
Suspect transactions at Cash App’s partner bank were disproportionate, exceeding major banks like JP Morgan and Wells Fargo, despite the latter banks having 4x-5x as many deposit accounts
“In Ohio, Cash App’s partner bank had 8x the suspect pandemic-related unemployment payments as the bank that processed the most unemployment claims in the state, even though the latter bank processed 2x the claims as Cash App’s, according to data we obtained via a public records request.
“As Block’s stock soared on the back of its facilitation of fraud, co-founders Jack Dorsey and James McKelvey collectively sold over $US1bn of stock during the pandemic.
“Other executives, including CFO Amrita Ahuja and the lead manager for Cash App Brian Grassadonia, also dumped millions of dollars in stock.”
A Block spokeswoman said the report was “designed to deceive and confuse investors.”
“We intend to work with the SEC and explore legal action against Hindenburg Research for the factually inaccurate and misleading report they shared about our Cash App business today,” she said.
“Hindenburg is known for these types of attacks, which are designed solely to allow short sellers to profit from a declined stock price. We have reviewed the full report in the context of our own data and believe it’s designed to deceive and confuse investors.
“We are a highly regulated public company with regular disclosures, and are confident in our products, reporting, compliance programs, and controls. We will not be distracted by typical short seller tactics.”
