International Tax Panorama

Ex Twitter CEO and Co-founder of Block Inc, Jack Dorsey’s fortunes plummeted a day after Hindenburg Research released a report on the payments company. 

Dorsey’s fortunes plunged by $526 million, and is now worth $4.4 billion, according to Bloomberg Billionaires Index. The 11 per cent drop in his fortunes was his worst single-day decline since May. 

About Block Inc.: 

Block, formerly known as Square, is a $44 billion market cap company that claims to have developed a “frictionless” and “magical” financial technology with a mission to empower the “unbanked” and the “underbanked”.

Hindenburg Report on Block Inc.

The US-based short-seller, Hindenburg, that had released a damning report on Adani Group in January, said that Block took advantage of the demographic it claimed to be helping. It accused Block and said that it “wildly overstated” the user count on Cash App and understated its acquisition costs. 

Fake Accounts

Hindenburg also accused Block of obfuscating how many users are on the Cash App by reporting misleading metrics, filled with fake and duplicate accounts. 

Former employees estimated that 40-75 per cent of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual, it claimed.

Criminals as the “underbanked” segment

Block embraced one traditionally very “underbanked” segment of the population: criminals.

Even when users were caught engaging in fraud or other prohibited activity, Block blacklisted the account without banning the user.

Its approach helped bad actors to mass-create accounts for identity fraud and other scams and extract stolen funds quickly. 

This phenomenon of allowing blacklisted users was so common that rappers bragged about it in hip hop songs.

CEO Dorsey has publicly touted how Cash App is mentioned in hundreds of hip hop songs as evidence of its mainstream appeal.

Used in “Sex Trafficking” 

Cash App was also cited “by far” as the top app used in reported US sex trafficking.

Multiple Department of Justice complaints outline how Cash App has been used to facilitate sex trafficking, including sex trafficking of minors.

Block’s reaction to the Hindenburg report:

Block trashed the charges and said it was exploring legal action against Hindenburg. It called the report on Cash App “factually inaccurate and misleading”. Block said that the report was “designed to deceive and confuse investors”.