Jack Dorsey's Block Tumbles 17% After Short-Seller Hindenburg's Report

The company accuses Block of "wildly" overstating user counts while understating customer acquisition costs.

AccessTimeIconMar 23, 2023 at 1:22 p.m. UTC
Updated May 9, 2023 at 4:11 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Fintech payments company Block (SQ) is down 17% after being the subject of the latest attack from notable short-seller Hindenburg Research.

"Our two-year investigation has concluded that Block has systematically taken advantage of the demographics it claims to be helping," said Hindenburg. "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."

Block was founded and is led by former Twitter (TWTR) CEO Jack Dorsey. An outspoken proponent of bvitcoin (BTC), Dorsey has led Block into offering bitcoin purchases and the development of a bitcoin wallet and mining rigs.

Bitcoin revenue, however, remain a small part of Block's overall business, which is dominated by the company's Cash App, and which is the focus of the Hindenburg report.

Hindenburg continued: "Our research indicates, however, that Block has wildly overstated its genuine user counts and has understated its customer acquisition costs. Former employees estimated that 40%-75% of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual."

"We have reviewed the full report in the context of our own data and believe it’s designed to deceive and confuse investors," said Block in a Thursday afternoon response to the report. "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."

Updated March 23, 17:40 UTC: Includes Block's response.



Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.

Stephen  Alpher

Stephen Alpher is CoinDesk's managing editor for Markets. He holds BTC above CoinDesk’s disclosure threshold of $1,000.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.


Read more about