© Reuters.
Investing.com – Shares in Twitter co-founder Jack Dorsey’s Block Company fell sharply after Heidenberg’s company published a suspicious dealings report on the company and helped it launder nearly $1 billion.
The company announced that it would sell the company’s shares short, repeating the scenario of what it did with the Indian company Adani Group, which led to the collapse of the company and the fortune of the Indian billionaire Adani.
Trump and Elon Musk… victims
Research firm Heidenberg claimed the company allowed criminal activity to operate with lax controls to swell the Cash App’s user base. The report described the rules put in place by Block to recognize dealers as terribly lenient and the notorious money-passing lane. The report revealed many experiences in which he impersonated famous personalities such as Elon Musk and Donald Trump, and the application approved, and they had more than one account in the name of Jack Dorsey in the company.
The company claims that when an account was created in the name of Donald Trump and the required steps were taken, the fake account was activated, and unemployment arrived from the company in the name of Trump the next day.
What did Block get?
“Our two-year investigation concluded that Block systematically took advantage of demographics that it claims help the company,” the short seller said in its report. The research firm added that Block’s Cash has thrived thanks to serving “unbanked” customers.
The report alleges that these unbanked customers were involved in criminal or illegal activity. Hindenburg also alleged that the Cash App’s compliance programs were deficient and weak.
As part of the two-year investigation, Hindenburg spoke with several former employees who described how internal concerns were suppressed and users’ concerns ignored, even as “criminal activity and alleged fraud” were rampant on its platform.
The report includes conversations with former employees of the company and highlights alleged erroneous financial reporting.
billion dollars from the air
Hindenburg claimed that up to 35% of the Cash App’s profits were derived from interchange fees. That’s roughly $892 million in proceeds that the short seller said should be limited by law.
But Block avoids the regulatory cap imposed on large financial institutions by channeling revenue through a small bank, Hindenburg claims.
The small bank routing method is one used by Block’s competitor PayPal, the short seller claimed, and which prompted an SEC investigation.
Citing interviews with former employees, Hindenburg alleged that “pressure from management has led to a pattern of disregard for anti-money laundering (AML) and know-your-customer (KYC) laws.”
The report notes, “This appears to be an attempt to grow the Cash App user base by strategically ignoring Anti-Money Laundering (AML) rules.”
“Former employees estimated that 40%-75% of the accounts they reviewed were fake, involved fraud, or were additional accounts linked to a single individual,” the report said.
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