Things are not going well for the payments platform provider Block. The company, which was founded by ex-Twitter CEO Jack Dorsey, was accused of “fraud” in a recent report by short-seller Hindenburg Research and saw its shares tumble more than 17 percent at one point on Thursday.
According to Hindenburg, an investment research firm that focuses on activist short-selling, the report is a result of a two-year investigation. It concluded that the Block “has systematically taken advantage of the demographics it claims to be helping.” The maker of the Cash App and Square prides itself in providing services to small and medium businesses that might have trouble getting them from traditional banks.
“The ‘magic’ behind Block’s business has not been disruptive innovation, but rather the company’s willingness to facilitate fraud against consumers and the government, avoid regulation, dress up predatory loans and fees as a revolutionary technology, and mislead investors with inflated metrics,” Hindenburg stated in the report.
The report also contained a number of other claims, including that Block’s user numbers have been fabricated or not genuine.
After the report gained massive exposure, Block released a statement refuting the claims and threatening legal actions against Hindenburg.
“We have reviewed the full report in the context of our own data and believe it’s designed to deceive and confuse investors,” said Block in a statement.
Block’s shares closed at $61.88 on Thursday compared to Wednesday’s closing price of $72.65.