Block denies short seller’s business, looks into action

The US payments firm Block Inc has rubbished the accusations levelled by Hindenburg Research and said it was looking into legal action against the short seller. The short seller's Cash App business was inaccurate and misleading, according to Block. It also accused the company's co- founder and CEO Jack Dorsey of making money by selling stocks worth billion of dollars during the pandemic.

Hindenburg claimed that Block reported a surge in user counts and revenue, ignoring the contribution of widespread fraudulent accounts and payments. The new business provided a one-time increase to Block's stock, which rose 639 per cent in 18 months during the Pandemic, according to the report.

Co-founders James McKelvey and Jack Dorsey sold over $1 billion of stock during the pandemic, as Block's stock went up on the back of its facilitation of fraud. The short seller said that other executives, including CFO Amrita Ahuja and the lead manager for Cash App Brian Grassadonia, dumped stocks worth millions of dollars.

Hindenburg claimed Block had obvious compliance lapses that made fraud easy, such as allowing single accounts to receive unemployment payments on behalf of multiple individuals from different states and ineffective address verification.

However, Block said it was confident about its products, reporting, compliance programmes, and controls. Block intends to work with the US Securities and Exchange Commission to explore legal action. After the report, Block's shares fell 22 per cent before paring losses and were last down 14 per cent at $62.61 in afternoon trading.

According to several interviews with former employees, the short seller alleged that Dorsey's firm was facilitating payments for criminal activity and the platform had been overrun with scam accounts and fake users.

Jack Dorsey has several fake accounts, including some that appear to be aimed at scamming Cash App users. Elon Musk and Donald Trump have dozens of alleged collabs, it is said.