Hindenburg Research accuses Jack Dorsey's Block of $1 billion fraud

Hindenburg claimed that Block had misrepresented its user count and underestimated its customer acquisition expenses. Block, formerly known as Square, had a $44 billion market cap, with media reports claiming that it has "magical" and "frictionless" financial technology to assist the "unbanked" and "underbanked.

The report alleges that Block, the payment firm behind Cash App, committed a host of violations, claiming the company has been willing to “facilitate fraud against consumers and the government, avoid regulation, dress up predatory loans and fees as revolutionary technology, and mislead investors with inflated metrics

Last year, the Bank of Lithuania launched its own investigation into Verse's compliance with its anti-money laundering rules. It discovered that Verse was failing to sufficiently verify its users' identities, leaving it open to criminal use, with numerous examples of fictitious identities being used to open accounts. In addition, the company "failed to ensure that customers who were at high risk of money laundering and terrorist financing were subjected to enhanced customer due diligence procedures." Cash App has faced similar criticism, as detailed in an investigation into its anti-fraud mechanisms and abuse by child sex traffickers.

Bernardo Hernandez, the former Verse CEO who oversaw the company's acquisition by Block in 2020, was also fined €75,000 for failing to address money laundering concerns, "despite the fact that he had been aware of the institution's irregularities for a long time.

The Lithuanian bank also stated that the Cash App subsidiary lacked adequate procedures for enforcing international financial sanctions. Such failures are especially concerning at a time when the United States, the United Kingdom, and Europe have imposed a slew of sanctions on Russian individuals and entities in the aftermath of the Ukraine invasion. The bank stated that Cash App's company would be required to address the issues and organise an independent audit to ensure that changes were made. That review must be submitted to the bank by October 1 or Block will face additional penalties.

Closer to home, the Consumer Financial Protection Bureau is looking into Cash App because of concerns that it was not adequately responding to user complaints about fraud and app usability. The CFPB claimed Block was "slow-walking" its response to requests for documentation after launching the case in August of last year.

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