Hindenburg Research said on Thursday it held short positions in Block Inc, alleging that the Jack Dorsey-led payments firm overstated its user counts and understated its customer acquisition costs.
“Our 2-year investigation has concluded that Block has systematically taken advantage of the demographics it claims to be helping,” the short seller said in a note published on its website.
Shares of Block fell 18% in premarket trading after the report.
Block did not immediately respond to a Reuters request for comment.
The U.S. short-seller, behind a market rout of over $100 billion in India’s Adani Group, said in its latest report that former Block employees estimated that 40%-75% of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual.
Reuters could not verify the claims raised by Hindenburg against Block.
About 5.2% of Block’s free float shares were in short position as of March 22, according to Ortex data.
Founded in 2017 by Nathan Anderson, Hindenburg Research is a forensic financial research firm that analyses equity, credit and derivatives. It has a track-record of finding corporate wrongdoings and placing bets against the companies.
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