On Thursday, Hindenburg Research revealed its short positions in Block Inc (SQ.N), claiming that the payments company led by Twitter co-founder Jack Dorsey had inflated its user numbers and downplayed customer acquisition costs.
Block has promised to fight back, stating that it would explore legal action against the short seller for the “factually inaccurate and misleading report” designed to mislead investors.
Shares of Block fell 15% to $61.67, after earlier plummeting 22%. Hindenburg, which caused a market rout of over $100 billion in India’s Adani Group, reported that up to 75% of accounts that former Block employees had reviewed were either fraudulent, fake, or additional accounts tied to a single individual.

Dorsey founded Block in his San Francisco apartment in 2009 to shake up the credit card industry and remains the company’s largest shareholder with an 8% stake. Hindenburg said that its two-year investigation showed that Block had systematically taken advantage of the demographics it claimed to help.
The report comes amid concerns over consumer spending, inflation, and expectations of an economic downturn, which have clouded the payments industry’s outlook. The claims raised in the report were not verified by Reuters. The Cash App platform, which Block offers as an alternative to traditional banking services, enables users to transfer money through a mobile application.
Hindenburg Research alleges Block overstated user numbers
In December 2022, Block reported in its fourth-quarter earnings letter that the app had 51 million monthly transacting actives, indicating a 16% year-over-year increase. However, according to the short seller, Hindenburg Research, the payments company’s co-founders, Jack Dorsey and James McKelvey, sold more than $1 billion of the company’s stock during the pandemic as its share price skyrocketed.
Additionally, other executives such as finance chief Amrita Ahuja and Cash App lead manager Brian Grassadonia also sold millions of dollars in stock. The short seller’s report suggested that multiple accounts, accusations of fraud, and opening accounts with fake names were ongoing issues with Cash App.
These claims have raised concerns among analysts, including Christopher Brendler, a senior analyst at D.A. Davidson & Co., who highlighted that the most damaging part of the report was the evidence of fraudulent activity.
According to financial analytics firm Ortex, short sellers have made more than $400 million in potential profit based on the stock’s 20% price drop in the current session as of 9:55 a.m. ET. The short interest was 27.96 million shares or 5.21% of free float. Block’s stock has become the top trending topic on the retail investor-focused forum StockTwits.
Additionally, the company has been negatively affected by the turbulence in the cryptocurrency industry, which constitutes a significant portion of its revenue. Block announced last month that it would significantly slow down hiring this year to manage expenses.