Block Inc. co-founder Jack Dorsey’s fortune tumbled by $526 million to $4.4 billion on Thursday after the latest Hindenburg Research report alleged the payments company ignored widespread fraud.
According to the Bloomberg Billionaires Index, Dorsey’s net worth dipped 11 per cent worst single-day decline since May.
On Thursday, Newyork-based short seller firm Hindenburg released a report claiming that Block had inflated user metrics and that its stock has a downside of 65 per cent to 75 per cent “on a purely fundamental basis.” The company denied the allegations and said it plans to explore legal action against the group.
Block’s stock fell as much as 22 per cent on Thursday, before closing down 15 per cent, reported Bloomberg. According to the report, Jack Dorsey, who was also the founder of Twitter, has most of his fortune linked with Block. The report estimates his shares in the firm are worth $3 billion. He also has shares of Twitter valued at $388 million.
It's not the first time Hindenburg, has targeted millionaires and reduced their wealth. Earlier this year, the company published an investigation into Indian businessman Gautam Adani and his firm, which sent his firm's stocks tumbling and destroyed tens of billions of dollars worth of his wealth. With a $60.1 billion fortune, Adani, who was formerly the second-richest person in the world, is currently ranked 21st on Bloomberg's wealth index.
Hindenburg has previously targeted electric carmaker Nikola Corp. in September 2020. Nikola’s stock plunged in the aftermath and an investigation led to a fraud conviction against its founder Trevor Milton in October.
What Are Hindenburg Report Allegations Against Block
A two-year investigation into Block, formerly known as Square Inc., has revealed that the company has taken advantage of the very people it "claims to be helping".
According to the report, the company has facilitated fraud against consumers and the government, dressed up predatory loans and fees as a revolutionary technology, and misled investors with inflated metrics. Block's approach to compliance was described by Hindenburg to be a "Wild West" one.
Block "developed a 'frictionless' and 'magical' financial technology with a mission to empower the 'unbanked' and the 'underbanked'," the report stated.
Titled 'Block: How Inflated User Metrics and “Frictionless” Fraud Facilitation Enabled Insiders To Cash Out Over $1 Billion,' the report involved interviews with former employees, partners, and industry experts. It found that the company has wildly overstated its genuine user counts and has understated its customer acquisition costs. The company's approach to compliance has made it easy for bad actors to create accounts for identity fraud and other scams, and then quickly extract stolen funds.