Hindenburg Research has been known for exposing frauds in the US including one that led to the conviction of startup Nikola's founder. But it created a buzz from Indian boardrooms to living rooms after alleging that the Adani conglomerate pulled off the greatest corporate fraud ever. Now Hindenburg has gone after Twitter founder and former CEO Jack Dorsey, exposing how his fintech app Block Inc enabled fraud.
The latest Hindenburg report claims that Block, previously known as Square, has been misleading investors with inflated user metrics.
An open playing field for scammers?
It has also allowed fraud against governments and consumers, by allowing criminals to avoid regulation by mass creation of fake accounts.
The Hindenburg investigation conducted over two years, shows how users were never banned for indulging in fraud, even though accounts were blacklisted by Block.
This means that they could simply create another account and a former customer service representative told Hindenburg that many such dubious players have hundreds of accounts.
Inflating data to fool investors?
Interviews with former employees fo Dorsey's firm, have also revealed to Hindenburg that 40 to 75 per cent accounts they reviewed were fake.
This means that Block overstated the user volume, which is the basis for analysts being positive about the app's post-pandemic surge.
Hindenburg's report also mentions Block's acquisition of buy now pay later app Afterpay in Australia.
Fooling customers one way or the other
But despite the initial euphoria, Afterpay's losses went up from $184 million to $357 million in a year after the takeover, and delinquencies doubled to 4.1 per cent.
Although Afterpay doesn't charge any interest for providing quick credit to pay in parts, its late fees can hit the equivalent of 289 per cent annual interest.
These irregularities alleged by Hindenburg suggest that Jack Dorsey's Block has been lying not just to investors, but also to consumers and the authorities.
This revelation has sent Block Inc's stocks crashing down by 17 per cent.
