Stock Market Hitman Firm Hindenburg Research Takes Aim At Dorsey's Block
The short selling firm has accused Jack Dorsey's firm of inflated metrics and "frictionless fraud" in order to cash out over $1 billion.
- Hindenburg Research is a short seller fund which makes money by taking short positions on certain publicly traded companies and releases their "research."
- Hindenburg has targeted about 30 companies since 2020 and their shares lost about 15% on average the next day, according to calculations by Bloomberg News. Six months later, the shares were down 26% on average.
- Block's shares have plunged by as much as 16% following publication of the report.
- In the report, the company claims that Block "has misled investors on key metrics, and embraced predatory offerings and compliance worst-practices in order to fuel growth and profit from facilitation of fraud against consumers and the government."
- "Our 2-year investigation has concluded that Block has systematically taken 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, dress up predatory loans and fees as revolutionary technology, and mislead investors with inflated metrics.
- "Core to the issue is that Block has embraced one traditionally very “underbanked” segment of the population: criminals. The company’s “Wild West” approach to compliance made it easy for bad actors to mass-create accounts for identity fraud and other scams, then extract stolen funds quickly."
- "Our research involved dozens of interviews with [undisclosed] former employees, partners, and industry experts, extensive review of regulatory and litigation records, and FOIA and public records requests."
- Block vowed to fight back, saying it would explore legal action against the short seller for its "factually inaccurate and misleading report" that was "designed to deceive and confuse investors."
- "Hindenburg is known for these types of attacks, which are designed solely to allow short sellers to profit from a declined stock price," the payments firm said, adding that it would work with the U.S. Securities and Exchange Commission. "We will not be distracted by typical short seller tactics.”
- The report ends with a prolonged disclaimer, which also includes the following: "Hindenburg Research makes no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results to be obtained from its use. All expressions of opinion are subject to change without notice, and Hindenburg Research does not undertake to update or supplement this report or any of the information contained herein."
- Hinderburg's founder Nathan Anderson has also issued a $1,000,000 bounty on information about Tether's backing last year.