Shares of Jack Dorsey‘s Block (NYSE: SQ) plunged by more than 15% in morning trading on Thursday after short-seller Hindenburg Research alleged that the company is facilitating fraud through its flagship Cash App and does not have strong compliance controls.
The report stated that Block had “highly” inflated Cash App’s transacting userbase and thrived on serving “unbanked” customers who were involved in criminal or illicit activity. Hindenburg’s report includes screenshots of internal systems and employee messages where employees alleged that “criminal activity and fraud ran rampant on its platform.”
Hindenburg has alleged that Block is completely disregarding Anti Money Laundering (AML) and Know Your Customer (KYC) laws to grow Cash App’s user base. To test this, Hindenburg was able to open accounts in the name of former President Donald Trump and Tesla CEO Elon Musk and was even able to open a Cash app card in the name of Donald Trump which then “promptly” arrived in the mail.
The report stated, “Our 2-year investigation has concluded that Block has systematically taken advantage of the demographics it claims to be helping.”
Analysts, however, remain so far bullish about SQ stock with a Strong Buy consensus rating based on 20 Buys and four Holds.
