Earlier this year, the short seller Hindenburg Research accused an Indian conglomerate of shady business practices and caused its stock to plunge. On Thursday, Hindenburg was giving the same treatment to Jack Dorsey, the former CEO of Twitter who now runs the mobile payment company Block. Hindenburg says Block, formerly known as Square, has falsely inflated its user numbers with "fake and duplicate accounts," reports the Wall Street Journal. It also accused Block of taking advantage of many of its "unbanked" customers with "predatory loans and fees."
"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 revolutionary technology, and mislead investors with inflated metrics," reads the Hindenburg report, described as a "bombshell" by Forbes. "As Block's stock soared on the back of its facilitation of fraud, co-founders Jack Dorsey and James McKelvey collectively sold over $1 billion of stock during the pandemic," Hindenburg asserts.
Shares of Block fell 19% Thursday after the report came out, per CNBC. That means a profit for Hindenburg, which announced it had taken a short position against the company's stock as a result of its two-year investigation. Neither Dorsey nor McKelvey has commented on the allegations. Hindenburg says it spoke with former Block employees who said internal concerns and those of users were suppressed as "criminal activity and fraud ran rampant on its platform." (Read more Jack Dorsey stories.)