New Delhi: In first remarks after a Hindenburg Research report claimed it facilitated fraud against consumers, Twitter co-founder Jack Dorsey-led payments firm Block Inc released a statement confirming that the company had internal estimates of the number of users on the Cash App platform that differ widely from the number of "transacting actives" disclosed publicly to investors as its key user metric.
A two-year investigation into Block showed that the company has taken advantage of the people it "claims to be helping".
According to the report, the company facilitated fraud against consumers and the government, dressed up predatory loans and fees as revolutionary technology, and misled investors with inflated metrics. Block's approach to compliance was described by Hindenburg to be a "Wild West" one.
Earlier on Thursday, Block disclosed that Cash App users comprise 39 million unique Social Security Numbers (SSNs) and 44 million verified accounts. It also revealed that the verification process is done through Block’s internal Identity Verification (IDV) program.
Notably, these disclosures differ sharply from the misleading “transacting actives” metric Block had previously reported to investors.
Based on the new 39 million to 44 million user counts, it was revealed that the cited 80 million annual user metric was inflated by 82%-105%.
Block’s newly reported internal estimates also reveal that its previously reported 51 million monthly transacting actives as on December 2022 represented a 16%-31% inflation of the actual estimated internal user counts.
Block’s latest disclosure makes it clear that the customer acquisition costs had been artificially lowered by inflation of the number of users on its platform. It also makes clear that claims of Cash App’s powerful network effects have similarly been overstated based on the same metric.
It is to be noted that the shares of Block fell over 18 per cent in pre-market trading after the Hindenburg report. Block "developed a 'frictionless' and 'magical' financial technology with a mission to empower the 'unbanked' and the 'underbanked'," the report stated.