Hindenburg Research, a financial research firm, has issued a report claiming that Jack Dorsey’s Block, formerly known as Square, has facilitated fraud for criminals, allowing them to conduct criminal activities using the platform. The report alleges that the company failed to exert know-your-customer (KYC) procedures, leading to inflated user metrics.
Jack Dorsey’s Block Accused of Facilitating Fraudulent Activities
Hindenburg Research, a financial research firm, has issued a report alleging that Block, the company formerly known as Square which pivoted to blockchain and mining, was involved in the facilitation of fraud schemes, and also inflated its user metrics by not enacting mandatory KYC procedures.
The report, published on March 23, discusses that the company allowed each user to have dozens or even hundreds of Cash App accounts, with criminals taking advantage of the mission of the company, directed to serve the underbanked and the underserved.
According to Hindenburg, former employees of the company estimated that between 40%-75% of the accounts on the app were fake, used to perform fraud-related activities, or extra accounts tied to a single individual. This is said to be a consequence of the lax requirements that Block has for account creation on the platform, with users needing just an email or an account number.
In addition to this, the policies of banning accounts and not individuals would allow blacklisted criminals to be onboarded again almost immediately by using a different email or phone number.
Fake Identities and Covid Relief Fraud
The report criticizes Cash App’s feature that allows each user to change their name and still make use of the services of the platform. Hindenburg found there were dozens of “Elon Musks”, and “Jack Dorseys” in the app. Furthermore, a Hindenburg employee was allegedly able to obtain a cash card issued in the name of Donald J. Trump.
Referencing Covid-19 relief payments, Hindenburg claims that Cash App served as a platform for scammers to organize fraudulent claims at that time, after Jack Dorsey announced the company would allow users without a bank account to receive the benefits.
As a result of the rampant fraud happening regarding these payments, Block started seeing complaints from several states in the order of the tens of thousands, according to former employees consulted by Hindenburg.
Hindenburg disclosed it was acting in the market, and betting against the price of Block’s stock, going in short. At the time of writing, Block’s stock price is down 10%.
What do you think about the latest Hindenburg Research report on Block’s activities? Tell us in the comments section below.
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