Short selling firm Hindenburg Research has recently released a new report targeting former Twitter CEO Jack Dorsey’s Block Inc., a payments company. The report accuses Block of facilitating a fraud against consumers and the government, avoiding regulation, and misleading investors. The company, which was formerly known as Square Inc., is currently valued at $44 billion.

Hindenburg’s two-year investigation revealed that Block’s Cash App platform, which saw a surge in usage during the pandemic, had wildly overstated genuine user counts and understated customer acquisition costs. The short selling firm alleged that 40% to 75% of the accounts reviewed were either fake, involved in fraud, or additional accounts connected to a single individual. The report also stated that the platform was overrun with scam accounts and fake users, as confirmed by interviews with former employees.

Hindenburg also criticized Dorsey for publicly touting Cash App’s mainstream appeal, citing that the platform had been mentioned in hundreds of hip-hop songs. The short selling firm highlighted the prevalence of fake accounts on the platform, including some that aimed to scam Cash App users. Examples include multiple fake accounts created by Dorsey himself, as well as fake accounts under the names of Elon Musk and Donald Trump.

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Cash App facilitated a massive wave of government COVID-19 relief payments during the pandemic. Dorsey tweeted that users could get government payments through Cash App “immediately” with “no bank account needed” due to its frictionless technology. However, Hindenburg’s study said the corporation had evident compliance flaws that made fraud easy, such as allowing single accounts to collect unemployment benefits on behalf of several individuals from various states and ineffective address verification.

Hindenburg’s report also accused Block of ignoring the contribution of widespread fraudulent accounts and payments to its pandemic surge in user counts and revenue. The company reported a sharp one-time increase in its stock price, rising 639% in 18 months during the pandemic. During the pandemic, Co-founders Dorsey and James McKelvey collectively sold over $1 billion of stock. At the same time, other executives, including CFO Amrita Ahuja and lead manager for Cash App Brian Grassadonia, also dumped millions of dollars in stock.

The allegations made by Hindenburg could significantly impact Block’s stock price and market position. The short seller’s report has already caused the company’s shares to drop by over 6% in pre-market trading.

Jack Dorsey co-founded Square in 2009 and served as CEO until 2015, when he was fired. He then returned to the company in 2017 as CEO and changed its name to Block Inc. Dorsey is also the CEO of Twitter, a position he has held since 2015. Under his leadership, Twitter has faced criticism for handling controversial content and misinformation on the platform.

In conclusion, Hindenburg Research’s report targeting Block Inc., led by former Twitter CEO Jack Dorsey, has accused the company of facilitating a fraud against consumers and the government, avoiding regulation, and misleading investors. The allegations, if proven true, could significantly impact Block’s stock price and market position.