Hindenburg: “As Block’s stock soared on the back of its facilitation of fraud, co-founders Jack Dorsey and James McKelvey collectively sold over $1 billion of stock during the pandemic.”

Hindenburg Research, a financial research firm, has accused Block (NYSE: SQ) (formerly known as Square) of facilitating fraud for criminals and inflating user metrics by failing to enact mandatory know-your-customer (KYC) procedures.

The report alleges that Block allowed users to have multiple Cash App accounts (alleged to run into the hundreds in some cases), with criminals taking advantage of the platform’s eagerness to serve the underbanked and underserved. (Bitcoin.com)

“The platform has been overrun with scam accounts and fake users, according to numerous interviews with former employees,” the Hindenburg report stated.

“To test this, we turned our accounts into “Donald Trump” and “Elon Musk” and were easily able to send and receive money. We ordered a Cash Card under our obviously fake Donald Trump account, checking to see if Cash App’s compliance would take issue—the card promptly arrived in the mail.”

The report also criticizes Cash App’s lax policies on account creation, banning accounts rather than individuals, which allowed blacklisted criminals to onboard again immediately using a different email or phone number.

Hindenburg also alleges that Cash App served as a platform for fraudsters to organize bogus claims during Covid-19 relief payments.

Hindenburg disclosed that it was betting against Block’s stock.

On Thursday, the stock fell 17.11% to $61.88. In Friday pre-market, it is down nearly 2% to $60.65.

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