Hindenburg Research, an activist short seller that has been behind bruising attacks on companies like Adani Group and Nikola, released the scathing report on Thursday morning. Block’s stock immediately plunged 19% before clawing some of those losses back a bit to land down about 12% by midday.
The research-focused group levied a series of allegations against Block, which centered on mobile payment giant Cash App. The two-year investigation found that the company wildly overestimates the number of users, was rife with fraud during the pandemic, and is a tool for many criminals, including sex traffickers and murderers.
To illustrate Block’s allegedly blasé attitude regarding the app being a tool to facilitate crime, Hindenburg pointed out that Block CEO Jack Dorsey has bragged about Cash App being mentioned in rap songs.
“We have a very mainstream customer for Cash App. And evidence of this is — I talked about this on the call, maybe on the stage before, but the number of hip-hop songs that include the phrase Cash App or even named Cash App is pretty incredible. I think it’s over 1,000 or 2,000 right now,” Dorsey said in 2020.
But Hindenburg argued that mentions of the app should not be something that Dorsey and Block celebrate because the artists in question are “not generally rapping about Cash App’s smooth user interface and robust software integration toolkit.”
Instead, rappers bring up Cash App in the context of facilitating crime, selling drugs, and even paying for targeted killings. For instance, Block promoted a music video by rapper 22Gz where he brags about using the money-transfer software to pay hitmen to kill his rivals.
“I had a gun in my backpack … I paid them hitters through Cash App shooters like Mitchell, put holes in his snapback, we stuffin’ bodies in trash bags I bet them hollow tips turn him to hashtags,” rapped 22Gz.
Last year, 22Gz was arrested and charged with attempted murder after three people were injured in a nightclub shooting.
Hindenburg also said that Cash App is used to pay for sex trafficking, including of minors. The group highlighted a 2021 article in which Sara Crowe, a senior director at Polaris Project, said that “when it comes to sex trafficking in the U.S., by far the most commonly referenced platform is Cash App.”
Hindenburg, citing former Block employees, also accused Cash App of being filled with a bevy of accounts tied to the same person. In an example of this, a former Cash App customer service representative shared customer management software that showed a single account connected to dozens of others by a shared Social Security number, phone number, email address, bank account, or device.
A former employee estimated that between 60% to 70% of accounts they reviewed during a usual shift while working at the company would have more than a dozen linked accounts. Another former employee estimated about 70% fell into that category, while a third guessed it was around 40%.
In its report, Hindenburg described how Cash App’s process of banning accounts made it easy for bad actors to simply make another account and return to using the software. For example, a user might be banned based on their email address but not more concrete identifiers such as a Social Security number.
“Cash App will not deny you based on your Social Security number. So, they’ll deny you on your email or your phone number, but if you get a new phone number or a new email, you can come back through to get the card because you’re not blocked by your Social Security number, so you can come right back in,” the former employee said.
The ease of hopping right back onto the app after being blacklisted was actually rapped about by another artist, Teejayx6, who released his own song titled “Cash App,” in which he bragged about easily making another account after being banned.
“They banned my Cash App because I sent a thousand transactions … I just bought another phone and made a Cash App,” he rapped.
Hindenburg accused Dorsey of taking advantage of people and said that — unlike traditional bankers — Dorsey passes himself off as a man of the people. Clad in tie-dye shirts and a long “guru beard,” the Block founder disguises himself and takes advantage of the demographics he is professing to care deeply about, Hindenburg contends.
“But a close look at Block shows that it has not actually changed the game — like traditional financial services companies, its key focus seems to be on dressing up predatory loans and fees as revolutionary products, avoiding regulation and embracing worst-of-breed compliance policies in order to profit from its facilitation of fraud against consumers and the government,” the report concluded.
The Washington Examiner reached out to Cash App’s press team for comment.