Hindenburg Research Grills Block’s Official Response; SQ Stock Price In Danger?

Pratik Bhuyan
March 31, 2023
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Hindenburg research block

According to U.S. short-seller Hindenburg Research, Block Inc.’s (SQ) reaction to its charges proved the company had been giving investors false information about the number of users of its Cash App for years. As of December 31, 44 million of the Cash App’s more than 51 million monthly active users had their identities validated, according to the payments company headed by Twitter co-founder Jack Dorsey.

Block Confirms Inflated User Count

The announcement comes after Hindenburg Research published a report the previous week in which it stated that former Block employees estimated that 40% to 75% of the accounts they assessed were fraudulent, involved in fraud, or extra accounts related to the same people. Following the opening of a short position in Block, Hindenburg asserted in the report that the payments company misrepresented the number of users of its Cash App and underestimated the costs associated with acquiring new customers.

Hindenburg was quoted as saying:

Block’s newly reported internal estimates also show that its previously reported 51 million monthly transacting actives as of December 2022 represented a 16%-31% inflation of its actual estimated internal user counts.

Read More: Top Mastercard-Backed Blockchain App Migrates To Hedera; Is HBAR Price Gunning For $1?

Hindenburg Claims Block Ignored Core Issues

The report provided precise details of compliance issues that led to Block supporting fraudulent pandemic relief payments estimated to be in the billions of dollars. These loopholes included glaring omissions such as the authorization for a single account to take unemployment payments on behalf of a large number of people residing in a variety of states.

In its response, Hindenburg contends that the company offered only a high-level defense of its compliance policy while acknowledging that it “saw an increase during 2020” of risk loss. In addition to that, the corporation did not provide an estimate of the loss that would be incurred by the government and the taxpayers of the United States as a direct result of the facilitation of fraudulent pandemic relief payments.

Also Read: Prominent Crypto Analyst Predicts Polygon (MATIC) Price Surge Following This New Development

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Why Trust CoinGape

CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights Read more…to our readers. Our journal analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.

About Author
About Author
Pratik has been a crypto evangelist since 2016 & been through almost all that crypto has to offer. Be it the ICO boom, bear markets of 2018, Bitcoin halving to till now - he has seen it all.
Investment disclaimer: The content reflects the author’s personal views and current market conditions. Please conduct your own research before investing in cryptocurrencies, as neither the author nor the publication is responsible for any financial losses.
Ad Disclosure: This site may feature sponsored content and affiliate links. All advertisements are clearly labeled, and ad partners have no influence over our editorial content.