Block loses 20% of value as Hindenburg Research alleges fraud

https://finance.yahoo.com/news/jack-dorsey-block-loses-20-164948270.html

by amalantony06 • 3 years ago

139 133 3 years ago

finance.yahoo.com

threatofrain• 3 years ago

Direct link to the source website:

https://hindenburgresearch.com/block/

SeanAnderson• 3 years ago

It seems like a pretty wild time to be on the offensive against American fintech companies. No real comment on the merits of their research (yet), just a little shocked at the timing.

gordon_freeman• 3 years ago

FYI: Hindenburg Research on Block (Square) has been going on for last 2 years. Not saying the release of the report is strangely coinciding with all the bad news we are having about Finance/Banking industries but wanted to add this info.

DoctorNick• 3 years ago

“You’d shoot a man in the back?”

“Well, it’s the safest way, isn’t it?”

phnofive2• 3 years ago

Always has been...

illiarian• 3 years ago

When is the right time to go against predatory and corrupt companies?

Yesterday. But today is a good second choice.

squokko• 3 years ago

Why?

PaywallBuster• 3 years ago

Doesn't look like Block's collapse would cause any issues with the financial system

mschuster916• 3 years ago

As a German, I used to think the same back when Wirecard was first attacked - and look where that ended.

Right now, the financial system is extremely unstable - bad actors with an awful lot of exposure have been exposed, and a lot of people are like sharks in the water, smelling blood. It looks like we're due for another come-to-Jesus moment in the banking scene, they haven't learned enough from 2008.

jahnu• 3 years ago

they haven't learned enough from 2008.

I think it looks like they learned a lot! I.e. make sure you get too big to fail.

blitzar5• 3 years ago

Why do you say that?

"apps" that do nothing more than transfer money two parties, representing 0 innovation and doing nothing new are valued in the 10's - 100's billions.

churchill• 3 years ago

Block published a press release [0] saying they intend to sue. But, that article by Hindenburg seems quite in-depth and they'll have a hard time squeezing themselves out of this.

[0] https://investors.block.xyz/news/news-details/2023/Blocks-Re...

Closi3• 3 years ago

Worth noting that the title of this HN post is a little misleading - and Hindenburg actually have not accused Block of fraud (only of facilitating others to commit fraud through their platform).

achow2• 3 years ago

Hidenburgh seems to have directly accused Block.

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.

https://hindenburgresearch.com/block/

benjaminwootton• 3 years ago

“ Initial Disclosure: After extensive research, we have taken a short position in shares of Block, Inc. (NYSE: SQ). This report represents our opinion, and we encourage every reader to do their own due diligence. Please see our full disclaimer at the bottom of the report.”

I’m surprised that it’s legal to short sell then go on the attack. If it is, imagine having the cojones to do that and then go live with this report.

bobnamob• 3 years ago

That’s Hindenburg’s MO. Extensive research -> short position -> publication of research

Closi3• 3 years ago

It’s legal but you must talk about facts and not make anything up, and you must act without insider information.

This is why the report is surgical in its wording.

mschuster916• 3 years ago

It actually is legal and the way how Hindenburg Research (and other popular/infamous shortsellers) make money: Research and expose fraud to hold companies accountable, with a (massive) financial stake to be correct in the research.

Personally, I used to be quite antagonistic to shortsellers, but at least the ones holding onto the principles of journalistic integrity and good research provide good value to society. Just look at Wirecard.

jhugo6• 3 years ago

Personally, I used to be quite antagonistic to shortsellers, but at least the ones holding onto the principles of journalistic integrity and good research provide good value to society. Just look at Wirecard.

Which ones don't provide value to society, and how do they differ from shills with a long position?

chewz• 3 years ago

What I am surprised of is how it is legal to have long position in stocks and then lie and pretend to increase the company value...

xmcqdpt2• 3 years ago

This here is why I never believe anything someone says about cryptocurrencies. Every time I ask a crypto enthusiast they'll eventually relent that yes they do own a lot of crypto they expect will go up in price.

(And in case someone argues that this is the same as anything else, it isn't. I own an iPhone. I recommend them to people, it works well etc. I don't benefit at all from Apple stock price going up.)

tylersmith• 3 years ago

It's wonderful; a natural market incentive for well-capitalized players to expose fraud and misconduct instead of participate in it.

jsemrau• 3 years ago

If you'd spent 2 years researching a topic you'd likely think otherwise.

bobcostas55• 3 years ago

Are you equally surprised that it's legal to go long and then talk your book?

phnofive2• 3 years ago

Dorsey [...] told investors about the large number of songs named after Cash App and described how music had become a way to share with others how valuable the app is to them personally, providing them with “so much utility.”
A review of songs mentioning Cash App shows that the artists are not generally rapping about Cash App’s smooth user interface and robust software integration toolkit.
Instead, lyrics describe how easy it is to move money through Cash App to facilitate fraud, traffic drugs, or even pay for murder.

pavlov2• 3 years ago

Dorsey is a big Bitcoin fan, so that’s the kind of utility he appreciates.

Coming soon: the CashApp ransomware API.

Bilal_io• 3 years ago

Dorsey is a big Bitcoin fan, so that’s the kind of utility he appreciates.

This sounds disingenuous. Not every fan of Bitcoin supports fraud, drug trafficking.. etc. The dollar is used for such bad activities, should we label everyone that loves the dollar as a supporter of fraud and drugs?

hindsightbias• 3 years ago

As long as it can be bundled with FDIC++ Insurance.

red-iron-pine2• 3 years ago

You joke but given the amount of Botnet as a Service and similar malware-for-pay options, I wouldn't be surprised if someone is working hard on that.

favaq• 3 years ago

I suppose those who have a problem with this would rather live in a cashless society, right?

alx__• 3 years ago

This is really just an attack on non-wealthy people.

If you're fucking wealthy, it's also very easy to move money for fraud, drugs, murder, literally anything. They just don't use the Cash App

dymk2• 3 years ago

It’s an attack on criminals, not non-wealthy people

mcosta2• 3 years ago

So what?

krisoft• 3 years ago

This is really just an attack on non-wealthy people.

It is not an an attack. Neither is it an "attack".

Nobody got hurt, nobody needs stitches, nobody was in fear for their life, autonomy, or well-being. Nobody brandished weapons, nobody damaged physical objects. That is why it is not an attack.

In modern parlance people started calling it an "attack" when someone was ever slo slightly mean to them. I think this usage is contemptible and should be called out. It devalues the meaning of the word. If a market participant publishing research is now an attack then what will you call when someone throws a punch and breaks a nose, or douses someone with gasoline and lights them on fire, or fires an intercontinental ballistic missile at a city?

decremental• 3 years ago

Rappers rap about crime because crime is a big part of their culture and so it gets glorified in their music.

andirk• 3 years ago

OK now do Western Union.

Full disclosure: I'm heavily invested in SQ.

intev• 3 years ago

https://en.wikipedia.org/wiki/Whataboutism

mardifoufs• 3 years ago

No, shouting whataboutism isn't actually some sort of universal gotcha even if it's the new overused internet buzzword. What you call whataboutism can be called precedent or market expectations. That's even how you usually do market research: you compare a company to its peers and determine the baseline (for revenue, financials and even the percentage of transactions that are fraudulent!)

slv77• 3 years ago

Western Union got fined a half a billion dollars because it helped facilitate fraud:

https://www.justice.gov/opa/pr/western-union-admits-anti-mon...

dboreham• 3 years ago

I missed the memo, which led to a few minutes trying to remember which blockchain company was named "block" but: why not cube? Or Hypercube?

achow2• 3 years ago

Block as in Blockchain.

quickthrower2• 3 years ago

More like line or point now.

polygamous_bat4• 3 years ago

My impression: because Jack Dorsey is a cryptobro and the rebranding was done in December 2021 when Blockchain was all the hype.

Of course, then came Terra Luna, FTX, and all that shebang, and Block wasn't the hot name it was anymore.

red-iron-pine2• 3 years ago

Might be time to rope in Jennifer Lopez for a marketing push

posharma2• 3 years ago

I know this is going to be controversial, but I think it has to be said. Jack ruined Twitter first [1] (by over-hiring and then selling it to Elon) and now it's Block's turn. He still made billions, while thousands got laid off and are still suffering under Elon's questionable so called leadership. Are these the entrepreneurs we should be looking up to? The tech industry is already facing the brunt because of the mistakes CEOs have done by "miscalculating" or "misjudging" the macroeconomic conditions; the same CEOs are enjoying their billions.

[1] https://twitter.com/jack/status/1588913276980633600

jmeister• 3 years ago

Twitter and Square wouldn’t have existed without Dorsey. Let’s not throw the baby out with the bathwater.

posharma2• 3 years ago

That doesn’t make him a good, responsible CEO.

pwdisswordfishc• 3 years ago

Okay, what can we say about his redeeming qualities for a change?

astrange3• 3 years ago

Parag sold to Elon, and he got a great return for shareholders by selling at far above market value.

Jack doesn't do anything but meditate and grow a beard like he's young Steve Jobs. Why the board let him be CEO when he didn't do any apparent work is a different question.

raverbashing2• 3 years ago

Who takes the deal or not is the board. Sure, Parag did the work, as it was his job as CEO

hellomyguys• 3 years ago

Jack is 46 years old... not really young at this point.

refulgentis• 3 years ago

The Bilton book was extremely illuminating on Dorsey, I totally agree, which reminds, I have to read longform more often....

mcosta2• 3 years ago

Better never been hired than hired and fired?

regulators• 3 years ago

Venmo has massive fraud too. I knew drug dealers in 2017 in San Francisco who openly sold marijuana, cocaine and other drugs via Venmo. Tens of thousands in transactions every 2-months.

Hindenburg criticized the ability for a user to get a debit card by mail in any name but that is a form of KYC. It is true many companies including PayPal don’t force you to provide your social security number. But the user can still be tracked.

I have never provided my social security number or face or ID to Venmo, PayPal or Cash App.

And the name I use on all those accounts is not my legal name. I do pay my taxes, I don’t commit crimes and it’s the name I use in real life and on social media.

This is more an attack on privacy rights and easy access to financial services. If fraud happens, law enforcement should prosecute. Don’t punish the lawful consumer.

Hindenburg’s just a more sophisticated scammer who apparently made $5 million off this trade-

https://twitter.com/unusual_whales/status/163897860486766592...

jevgeni4• 3 years ago

Hindenburg criticized the ability for a user to get a debit card by mail in any name but that is a form of KYC.

Not sure I understood you correctly, but this is the opposite of KYC.

blitzar5• 3 years ago

Did they mean that once you obtained banking in one false name you could use that to pass KYC with other facilities?

sedatk• 3 years ago

Hindenburg's on fire nowadays.

CatWChainsaw• 3 years ago

Oh the humanity.

sam_goody2• 3 years ago

In yesterday's thread about Hindenburg's post[1], there were several who claimed that Square rounds down to the nearest penny when paying their customers, and keeps the difference, and this amounts to millions. This both for their shares and their payments.

I do not know if that is fraud, but if so, Hindenburg should pay attention.

BTW, this was done in Superman, and used to build an [evil] AGI. Of course, that is just science fiction. Just to be sure though, is Square a partner in OpenAI?

[1] https://news.ycombinator.com/item?id=35273782

neffo• 3 years ago

Fraud? Illegal? Samir this is America!

TaylorAlexander• 3 years ago

It was also done (incorrectly) in Office Space, noting the inspiration from Superman in the text of the film.

Liberonostrud• 3 years ago

I haven't used Bitcoin since 2014. In ten years I never missed it once. Unlike my phone, or Hackernews website. But, I am not a criminal or scammer, so not the target group I guess. Bitcoin is like Victor Wondermega RG-M1.

locallost• 3 years ago

I agree there's a need for short sellers to keep the market in check, but this quote, also listed as the number one issue, doesn't really sit well with me:

Misleading investors by overstating its genuine user counts, with former employees estimating as much as three quarters are “fake, involved in fraud, or…additional accounts tied to a single individual.”

Do they really know? Or is it just a feeling that they have, or a rumour somebody spread? Is it a rumour a former disgruntled employee blew up out of proportion?

The risk to the short seller is clear, but if they're going to advertise themselves as a "new breed of short sellers, relying on deep research", then they should come up with deep research, not this. Of all the things listed, I didn't see one thing that is based on any real data. They obviously hold clout because if I came up with this, the market wouldn't really care.

But maybe it can't really be fixed, don't know. Maybe the short seller is the fraud and it needs to take down several companies before people realize it's BS and eventually gets wiped out.

shp0ngle2• 3 years ago

The report is quite long and detailed

squishy47• 3 years ago

I've not read the article but I have a question: lets say, after an investigation by the Gov, the illegal doings in the article turn out to be false. Do the company shareholders of the accused company have the right to sue, in this case Hindenburg research, for the stock value loss due to the article?

polygamous_bat4• 3 years ago

Yes, if you publicly claim things that are not true and it causes a company's share price to go down, the shareholders can sue you for damages. For example, [0] shows how Elon got sued by twitter shareholders for his "bot" claims.

[0] https://www.bloomberg.com/news/articles/2022-08-01/musk-sued...

shp0ngle2• 3 years ago

They even made a rap compilation video!

https://www.youtube.com/watch?v=StjWk3Mj-M4

domatic1• 3 years ago

Looks like there is a full attack against crypto related companies

Block loses 20% of value as Hindenburg Research alleges fraud

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