Block Silent on Promoting Song About Using CashApp to Pay for Murder: Hindenburg
Activist investor Hindenburg Research responded to Block’s statement on Hindenburg’s earlier report justifying its short position, which was published earlier this month. Hindenburg stated in their response that Block had inflated user metrics when reporting to investors and also did not deny promoting a song about CashApp being used to pay for murder, among other things.
Hindenburg Says Block’s Response Confirmed Inflated User Count Allegations
Hindenburg Research has released a new report in response to Block’s reaction to the fraud allegations that Hindenburg had made against the fintech company earlier this month. In the report, Hindenburg claims that Block did not deny its earlier allegations that the company had paid to promote a song called “Cash App” by 22Gz, which allegedly detailed how one can quickly pay for murder using the Cash App.
The short seller said it provided evidence in its initial report “that Block paid to promote a song and video called “Cash App” by 22Gz. The song detailed how easy it was to use Cash App to pay hitmen to murder rival gang members.” However, Block “has said nothing” in reply to these claims, Hindenburg alleges in the new report.
In addition, Hindenburg says that Block’s response to its initial report confirmed the short seller’s allegations that Jack Dorsey’s company has been inflating user numbers for years. The activist investor says Block’s recently released internal estimates of Cash App user count differed significantly from the number of “transacting actives” reported publicly to investors.
According to Hindenburg, Block reported 39 million unique Social Security Numbers (SSNs) and 44 million verified accounts that use Cash App. Still, in its September 2022 user count disclosures, Block said 80 million annual transacting actives use the app. The inflated numbers were used “as a justification” for Block’s acquisition of Afterpay, Hindenburg states in the report.
Hindenburg Claims Block “Vaguely” Admitted Illegitimate Covid Relief Payments
Further in the report, Hindenburg also accused Block of “vaguely” conceding how its fraud expenses during the Covid-19 pandemic increased. But the company did not provide specific figures, the short seller alleged.
In its initial report, Hindenburg said it outlined specific compliance gaps that led to Block facilitating billions of dollars in coronavirus relief fraud. But in its response, Block offered only a high-level defense of its compliance controls and only said it noticed “an increase during 2020” of risk loss, Hindenburg states. Further, the fintech company did not provide estimates of the losses incurred by the US government and taxpayers due to its “facilitation of illegitimate pandemic relief payments,” Hindenburg added.
In its first report released on Mar. 23, Hindenburg said it shorted Block’s stock, accusing the company of “frictionless” fraud, among other things. Block issued a prompt response, saying Hindenburg’s allegations were “inaccurate and misleading,” adding it intends to work with US regulators to explore legal action against the activist investor.
This article originally appeared on The Tokenist
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