Former Twitter co-founder and CEO Jack Dorsey was left poorer by $526 million after short-seller Hindenburg Research revealed that his digital payment company Block facilitates fraud against consumers and the government.
After his worst single-day decline, Dorsey is now worth $4.4 billion, according to Bloomberg Billionaires Index.
Block’s shares also nosedived as much as 22 percent on Thursday, before closing down 15 percent late on Thursday.
Block, formerly known as Square, claims to have developed a “frictionless” and “magical” financial technology with a mission to empower the “unbanked” and the “underbanked”.
“Our 2-year investigation has concluded that Block has systematically taken advantage of the demographics it claims to be helping,” said Hindenburg Research in its report, taking its latest short position on Block.
“We also believe Jack Dorsey has built an empire — and amassed a $5 billion personal fortune — professing to care deeply about the demographics he is taking advantage of,” it added.
Block or Dorsey was yet to react to the Hindenburg report.
According to the report, Block embraced one traditionally very “underbanked” segment of the population: criminals.
“The company’s ‘Wild West’ approach to compliance made it easy for bad actors to mass-create accounts for identity fraud and other scams, then extract stolen funds quickly,” the report mentioned.
In sum, “we think Block has misled investors on key metrics and embraced predatory offerings and compliance worst-practices in order to fuel growth and profit from facilitation of fraud against consumers and the government,” said Hindenburg.
