While this doesn't look great, it doesn't really seem up to the standards of past Hindenburg reports. Block's main product is credit card processing and point-of-sales, for retailers, and they have a reputation for being the easiest to use and deal with.<p>I could easily believe that they are not doing their KYC work and that the feds will soon make them do so, but it doesn't really seem to add up to the company being a "fraud".<p>Which, to be fair, the Hindenburg headline doesn't say, it's "Block: How Inflated User Metrics and “Frictionless” Fraud Facilitation Enabled Insiders To Cash Out Over $1 Billion". Facilitating fraud (by not doing enough KYC, etc.) rather than the company being a fraud.
I'm a former block employee who has seen first hand the documents that proves these allegations. Marketing intentionally preyed on poor communities to promote cash app. They would refer to cash app as "payments for poor people". What's worse is Jack uses a large part of the companies budget to fund his personal Bitcoin projects.<p>If you voiced any concerned you were silenced and eventually terminated.
FYI if anyone is interested I can prove it -- Cash App is engaged in a massive stock trading fraud.<p>I noticed one day that my books were off (down) by 1 penny. When I dug into it, I figured out that Cash App is providing their customers with conflicting reports for their stock sales.<p>In the app, the sales report rounds pennies up, in the actual sale, whose records are only available through more complex data export process, the penny in the sale is rounded down, and they are keeping the difference.<p>I found the rule in the legal terms which states that the calculation in the app presented to users is the correct one, and the penny is illegally missing.<p>This is for every trade for every one of their users. The aggregate amount of money is huge.<p>Edit: I just looked back at my analysis and now remember in some cases the missing money is more than one penny. If anyone would like to contact me one on one I can provide more proof.
This is bad for Block. I hope. It's incredible that since 2008 it actually seemed immensely easier to skirt regulations and laws (under the banner of 'innovation'), and not just in finance. Just about all of silicon valley seems to have run the longest and broadest grift we've seen.<p>This year's gonna get real interesting.
"CEO Jack Dorsey has publicly touted how Cash App is mentioned in hundreds of hip hop songs as evidence of its mainstream appeal. A review of those songs show that the artists are not generally rapping about Cash App’s smooth user interface—many describe using it to scam, traffic drugs or even pay for murder."<p>Hindenburg made a music video compiling the references that is...uh...worth watching: <a href="https://www.youtube.com/watch?v=StjWk3Mj-M4">https://www.youtube.com/watch?v=StjWk3Mj-M4</a>
> One former customer service employee estimated that 60%-70% of the accounts they reviewed during a typical shift would have more than a dozen linked accounts. Another two former employees estimated 40% and 75%, respectively.<p>I don't think this necessarily means that 40%-75% of the accounts on Block's books were fake (as I took it to first mean from the summary). Could it just mean that the accounts that were set up for review based on high risk activity were predominantly fraudulent (as they should be)?
Skimmed through the report, and all of the allegations will at most amount to a token fine. There's nothing fundamentally wrong with the company. Every bank and money transfer app out there facilitates criminals in some way. Every tech (especially fintech) company is overvalued.<p>The market is overreacting because of Hindenburg’s past successes, but the stock price has already recovered by 10+ points since this morning and is rising. I predict all of it will amount to nothing in the end.
> “I Paid Them Hitters Through Cash App”: Block Paid To Promote A Video For A Song Called “Cash App”, Which Described Paying Contract Killers Through The App.<p>> The Artist, “22Gz”, Was Later Arrested for Attempted Murder<p>It astonishes me how many rappers do this. It’s one thing to be a criminal, and it’s another to rap about your crimes and do the job of the investigators…they probably think it makes them tough or something.
I didn't know Square had changed their name to Block. Looks like it happened in December 2021: <a href="https://investors.block.xyz/news/news-details/2021/Square-Inc.-Changes-Name-to-Block/default.aspx" rel="nofollow">https://investors.block.xyz/news/news-details/2021/Square-In...</a><p>That said this really seems overblown. The report seems to mostly just talk about Cash App. Square Payments, Weebly and TIDAL are not even mentioned. Afterpay is mentioned but that was a 2022 acquisition so the problems likely predate Block's involvement.<p>It feels weird that they're using Cash App to indict the company as a whole. A single product in their portfolio doesn't justify calling the whole company a fraud.
The pre market is looking brutal: <a href="https://www.marketwatch.com/investing/stock/sq" rel="nofollow">https://www.marketwatch.com/investing/stock/sq</a><p>Those puts are going to pay off handsomely.
>> Cash App’s frictionless approach lets users join with just an email or a phone number.<p>I don't know, I've been asked to send a selfie and a driver license, and activate the physical card they sent in the mail to my registered address - all the usual KYC procedures.<p>They also did send a 1099 form for all Bitcoins I deposited to the app in 2022.
Chesterton's Fence strikes again - every so often, someone has the bright idea of uninventing all the rules for just long enough that all of the reasons the rules were invented in the first place can regress back into existence.
I had never heard of cash app (probably because I'm not underbanked) until my mother in law fell for some phishing scam and the scammer was trying to get her to send money through cash app.
Wow...<p>> “Every Criminal Has A Square Cash App Account” – Former Employee<p>> The Signs Are Hard To Miss: There Is Even A Gang Named After Cash App, With Members Arrested For Fentanyl Distribution<p>> Our research shows that Block has embraced a traditionally very underbanked segment of the population: criminals.<p>> Many of These Songs Describe The Role of Cash App in Facilitating Criminal Activity, Including Murder-For-Hire<p>> Cash App Was Cited As “By Far” The Top App Used in Reported U.S. Sex Trafficking, According to A Leading Non-Profit Organization<p>> Department of Justice Complaints Outline How Cash App Has Been Used To Pay For Sex Trafficking, Including Sex Trafficking Of Minors
Given how effective this appears to be for moving the market, I'm surprised how much fluff and insubstantial evidence is present in this post. For example, the important charge that the company has supported criminal activity. An assertion is made that the company turns a blind eye to obvious criminal activity, but no hard evidence is provided. Instead it spends time on the fact that a rapper was paid to promote the service who was later arrested. We don't even get any numbers to show the rate of criminal activity that is conducted with Cash App vs Venmo, Paypal, wires, crypto, or cash.
> CEO Jack Dorsey has publicly touted how Cash App is mentioned in hundreds of hip hop songs as evidence of its mainstream appeal. A review of those songs show that the artists are not generally rapping about Cash App’s smooth user interface—many describe using it to scam, traffic drugs or even pay for murder. [See our compilation video on this here][0]<p>[0] <a href="https://www.youtube.com/watch?v=StjWk3Mj-M4">https://www.youtube.com/watch?v=StjWk3Mj-M4</a>
"Block’s $29 billion deal to acquire ‘buy now pay later’ (BNPL) service Afterpay closed in January 2022. "<p>Oh man, big impairment charges coming... $29B.
Weird,
I use cashapp as my daily debit card. Figure it reduces overall risk by only having a set amount available for use at any time.<p>If I need to spend more? I move it to cash app, then spend it.<p>My main checking and savings accounts do not even have cards that are active. Its all cash app all the time.<p>Not saying they aren't doing anything wrong, just that there are plenty of legitimate uses for the service.
Is there an easy way to get exposure to Hindenburg's reports/bets, like some kind of fund that shorts the stocks they report on? Would love to get in on the action, but I'm afraid to open a brokerage account to short stocks and then make a tiny mistake and be out like a hundred grand!
"The “magic” behind Block’s business has not been disruptive innovation, but rather the company’s willingness to facilitate fraud against consumers and the government, avoid regulation, "<p>Isn't that the whole point of 'disruptive innovation'?
Isn’t this pretty bad for the Block, Inc leadership. KYC and money laundering laws are one of the few corporate laws that can result in doing actual jail time.<p>In addition, politics being what it is, with the SVB “bailout” the Biden administration will be looking for something to show that they are not coddling Silicon Valley. Throwing a few execs in jail would send the message.
Misleading headline - the article doesn't actually call Block Inc a fraud.<p>It just claims that Block Inc are overvalued, that their metrics are misleading, and that their platform is facilitating fraud.
Wow, another example of a Jack Dorsey company being just <i>great</i> for our world. When are people going to realize that this guy is a total shithead?
“I paid them hitters through Cash App”— Block paid to promote a video for a song called “Cash App” which described paying contract killers through the app. The song’s artist was later arrested for attempted murder.
Lol OK..<p>Nathan Anderson is the founder of Hindenburg Research, a New York-based investment management firm, and a forensic financial investigator that is famous for releasing reports on alleged wrongdoing by companies. When publishing some of these reports, his company profits by short selling the target company's stocks (that is, by making a bet in securities markets that the price of the company's shares will decline). If all goes according to plan, the report itself will cause the price of the stock to decline, leaving Hindenburg Research with a profit from its short position.