Jack Dorsey’s company Block saw a 20.13% drop in share price after Hindenburg Research accused it of allowing criminal activity and inflating Cash App’s user base.

“Our 2-year investigation has concluded that Block has systematically taken advantage of the demographics it claims to be helping,” Hindenburg said in its report.

Block’s Cash App succeeded by serving customers who are “unbanked,” according to the research firm.

The share price of Block Inc. (SQ) was open at $77.5 on Wednesday on NASDAQ. On Thursday, it closed at $61.88 after rebounding from a 24-hour low of $56.5.

“Block Inc., formerly known as Square Inc., is a $44 billion market cap company that claims to have developed a “frictionless” and “magical” financial technology with a mission to empower the “unbanked” and the “underbanked,” said the report.

Hindenburg’s allegation is that those unbanked customers were involved in criminal or illicit activity.

“Beyond facilitating payments for criminal activity, the platform has been overrun with scam accounts and fake users, according to numerous interviews with former employees.”

Hindenburg Research’s comprehensive report includes internal system screenshots, employee messages, and allegations of financial misreporting.

Block denies Hindenburg claims

Responding to the claims, Dorsey’s Block denied the accusations and said it would explore legal action.

“We intend to work with the SEC and explore legal action against Hindenburg Research for the factually inaccurate and misleading report they shared about our Cash App business today,” said the company in a press release.

Hindenburg Research is known for “these types of attacks,” according to Block. Such reports “are designed solely to allow short sellers to profit from a declined stock price.

“We have reviewed the full report in the context of our own data and believe it’s designed to deceive and confuse investors,” added the firm.

Block is “a highly regulated public company with regular disclosure with confidence” and “will not be distracted by typical short seller tactics,” according to the release.

$526 million lost in a single day

In just one day, Dorsey’s wealth decreased by $526 million, reported Bloomberg.

“So Block is acting perfectly in line with the financial industry it finds itself in? Shocking,” wrote a Reddit user in response to the CNBC news.

“I didn’t want to believe-it before reading the report, which is well-researched, well-documented, thorough and eye-opening. “Say it ain’t so”, bc I’ve always liked/used Square, from day-one. But Dorsey has a lot of explaining to do,” wrote one Twitter user, Thomas C. Wynn.

Although the report may be “anecdotal and drummed up for their personal short game,” Thomas contends that “Block needs to answer point-by-point.”

The Hindenburg Research report follows a previous one on Indian conglomerate Adani Group, which lost over ₹12 lakh crore in market value.

“Today we reveal the findings of our 2-year investigation, presenting evidence that the INR 17.8 trillion (U.S. $218 billion) Indian conglomerate Adani Group has engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades,” said Hindenburg at the time.

This article is originally from MetaNews.

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