Twitter Inc. Co-Founder Jack Dorsey speaks at the Bitcoin 2021 Conference in Miami, Florida, USA on Friday, June 4, 2021.
Eva Marie Uscategui | Bloomberg | Bloomberg | Getty Images
jack dorsey stock block After short seller Hindenburg Research announced on Thursday that the payment firm was the latest short position, Cash App allowed criminal activity with lax controls and reduced Cash App’s trading user base, a key indicator of performance, to ” It plummeted 19% after claiming to be very ‘inflated’.
Shortseller described Block’s internal system as a “‘Wild West’ approach to compliance.”
“Our two-year study concluded that the Block systematically exploited the demographics it claimed to support. Said in that report. According to the research firm, Block’s Cash App succeeded by serving “unbanked” customers.
The report alleges that unbanked customers were involved in criminal or illegal activities. Hindenburg also alleges that Cash App’s compliance program is inadequate.
As part of a two-year investigation, Hindenburg spoke with several former employees and found that internal concerns were suppressed despite allegations that “criminal activity and fraud are rampant on the platform.” , explained that the user’s concerns were ignored.
Detailed Hindenburg reports include screenshots of internal systems and employee messages. It also highlighted allegations of financial misreporting.
Up to 35% of Cash App’s revenue comes from exchange fees, Hindenburg claims. That’s about $892 million in revenue, which the short sellers say should be capped by law.
But by directing the proceeds to smaller banks, Mr. Block avoids regulatory caps imposed on large financial institutions, Mr. Hindenberg said.
The small bank routing method is the one used by block rivals. PayPalclaimed by short sellers and prompted a Securities and Exchange Commission investigation.
PayPal did not immediately respond to a request for comment.
Hindenburg took issue with Cash App’s practice during the pandemic in which the government issued stimulus checks to eligible American adults. The report claims that the lockdown “posed an existential threat” to Brock’s vital merchant services business.
“Cash App’s frictionless technology will allow users to receive government payments ‘instantly’ without the need for a bank account,” said CEO Jack Dorsey. tweeted,” the report said.
Just weeks after Cash App made its first payment to the government, the state was trying to get back the apparently fraudulent payment. Name several ex-employees.
“The Freedom of Information Act (FOIA) request we filed with the SEC indicates that Block may be part of a similar investigation,” Hindenberg wrote.
Citing interviews with former employees, Hindenberg claimed that “pressure from management has resulted in a pattern of disregard for anti-money laundering (AML) and know your customer (KYC) laws.” bottom.
“This appears to be an attempt to expand Cash App’s user base by strategically ignoring anti-money laundering (AML) regulations,” the report said.
To test the theory, the shortseller opened an account in the names of former President Donald Trump and Tesla CEO Elon Musk and issued a Cash App card called Cash Card under an “apparently fake Donald Trump account.” opened, the report said. .
A card with Mr. Trump’s name on it arrived in the mail “immediately.”
“Former employees estimate that between 40% and 75% of the accounts they review are fake, involved in fraud, or are additional accounts associated with a single individual,” the report states. said.
A representative for the block did not immediately respond to a request for comment.
“In short, Brock misleads investors about key metrics, accepts predatory offers and the worst practices of compliance to drive growth, and encourages fraudulent practices against consumers and governments to make profits. I think I got it,” he said.
