Shares of the fintech company Block tumbled on Thursday morning after an activist short seller released a report accusing the company of facilitating illegal and fraudulent transactions.
Block, previously known as Square, is a digital payments company that offers cash register services at businesses like cafes and farmers-market booths. But it also offers mobile transactions through Cash App.
Hindenburg Research, a firm that made waves for betting against Adani Group in January, alleged in a new report that Block allowed users to make transactions through Cash App for illegal activity and helped facilitate fraud linked to covid-19 aid.
“Former employees described how Cash App suppressed internal concerns and ignored user pleas for help as criminal activity and fraud ran rampant on its platform,” the report alleges.
Hindenburg also said it took out a short position on Block, meaning it is betting against the company’s stock price.
Block, which was founded by Twitter founder Jack Dorsey, did not immediately respond to a request for comment. Its shares were down by as much as 19 percent on Thursday morning.
In January, Hindenburg took a short position on Adani Group, an Indian conglomerate owned by one of Asia’s richest men. At that time, Hindenburg released a report accusing Adani of artificially boosting its share price using a network of overseas shell companies. Adani denied the allegations, but it shares tanked on the release, and months later the company remains embattled.
Hindenburg also made waves in 2020, when shares in the electric vehicle maker Nikola cratered after it was accused of misrepresenting its technology. Hindenburg took a short position on Nikola, and investigations from the Justice Department and securities regulators followed. Nikola’s founder was later convicted on fraud charges.
Hindenburg was founded by Nate Anderson, an activist short seller who has quickly risen to prominence in the past several years. Activist short sellers are controversial: Some see them as unsavory actors because their success hinges on a company’s failure. But others say they important actors driven by high financial rewards to expose corporate fraud.
This is a breaking story and will be updated.
Source: washingtonpost.com
