New Delhi: Months after scathing report on India’s Adani Group, leading to a freefall in latter’s stocks, on Thursday leveled multiple accusations on US-based fintech film Block Inc, founded by former Twitter CEO Jack Dorsey. In its scathing report, the Hindenburg claims that Dorsey-led firm overstated its user accounts & understated its customer acquisition costs. It also accused Dorsey’s company of committing fraud and engaging in insider trading, a practice punishable under law in United States. This January, the US-based short seller published a ‘damning’ report on Adani Group, which resulted in its market rout of more than $100 billion. In its report on Block, the short seller said that many of former Block employees said that 40%-75% of accounts they reviewed were either fake or involved in fraud. What Hindenburg said in ‘Block’ report Our 2-year investigation found that Block systematically took advantage of the demographics it claims to be helping. The “magic” behind Block’s business has not been disruptive innovation, but rather the company’s willingness to facilitate fraud against consumers and the government, avoid regulation and mislead investors with inflated metrics. Those at the top management of Block managed to cash out over $1 billion via insider trades between March 2020 and December 2021. It claimed that Block’s Cash App allowed presence of scam accounts & fake users on its platform. To support this claim, Hindenburg also created fake accounts under name of Donald Trump & Elon Musk and showed that it was quite easy to send & receive money between fake accounts. Block shares plunge Following the Hindenburg report, the shares of Dorsey-led firm Block plunged to low levels. The stocks crashed almost 19% during pre-market trading in the US markets. It’s worth nothing that Hindenburg report claimed that Block Inc has 65-75% fundamental downside. In Adani group report, it had claimed a downside of 85%. Within days of its report, Adani shares wilted under pressure and most of its leading companies saw bloodbath on stock markets. It’s may be early to guage the impact of Hindeburg report on Dorsey’s fintech firm but the volatility in its stocks has begun.
