After getting blindsided by a brand spanking new takedown from US short-seller Hindenburg Research – which didn’t blindside Stockhead’s Eddy Sunarto – the ASX-listed shares of Block Inc (ASX:SQ2) – that’s the payments firm which ate local BNPL leader Afterpay and is chaired by Jack Dorsey – crashed as much as 20% on Friday.


Obviously the most pressing question, now that the Block’s chairman’s personal wealth has been trimmed to the tune of over half-a-billion US greenbacks, is who will date the young Scorpio now?

Along with his currently-on-fire-tech-payments business, Jack likes being buff, being re-buffed by Frenemy Elon I broke your toy Musk and long walks on beaches. Jack is also licensed massage therapist. His Twitter handle is @jack. That admittedly, is pretty cool.

But not only is @jack heaps less wealthy, his prospective date won’t really be able to look forward to lots of romantic meals, since one of his billionaire eccentricities is to only eat once a day.

@Jack on Solitude, Self-Care and allegations of targeting vulnerable groups with exploitative loans

But now @jack is at the centre of crazy allegations his payments firm’s been engaging in al sorts of mean fraud, who will engage with @jack?

I am Jack’s flaming recap…

Actually, let’s backtrack and clear up the more obvious question. What’s short-selling?

So this is a high-stakes market gamble which involves borrowing shares, selling them, and buying them back at a lower price to gain profit. Boom.

Problem here is if the stock rises, short-sellers end up losing heaps – multiples – of money instead.

Hedge funds and institutional investors mainly muck about short-selling as a hedge to protect their investments from falling stock prices and because they can afford to get it wrong once in a long while.

But then, a few places – like Hindenburg – make their whole schtick about it. They do the research themselves to identify and unearth the goods which will out companies involved in dodgy, unethical business.

They place a big bet and then publish their findings with the aim of smashing their target’s reputation and thus the stock value, which allows them to clean up on their short positions.

Meantime, Block Inc and its co-founding chair Jack Dorsey are both finding their market caps getting shorter this weekend after the new Hindenburg report, which not only alleges the new Afterpay-owners ignored widespread fraud but has also has wildly overblown its user numbers and vastly understated its customer acquisition costs. These are what powers the value of payments companies.

Naughty, if true.

Worst singles day ever

Dorsey’s fortune plunged by US$526 million on Thursday, that is Jack’s worst single-day decline since like, actually only about one year.

The Hindenburg report, similar in length, tone and malign intent to the Adani one they let off earlier in the year, (and which produced a market rout of more than US$100 billion), describes former Block employees estimating as much as 75% of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual.

Run by Nathan Anderson, Hindenburg published its report after a two-year investigation.

“Block has systematically taken advantage of the demographics it claims to be helping,” Hindenburg says.

Even worse sounding, Hindenburg alleges Block rolled out a predatory strategy of targeting minorities, millennials, and gormless Gen Z’ers with inflamed fees and cruel loan rates.

“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 revolutionary technology, and mislead investors with inflated metrics.”  

Hindenburg also took its short club to Block’s shonkily-named, possibly murderous Cash App for its vacancy of oversight when concerning what users are actually up to – the short-seller says an entire ecosystem of them allegedly use the unregulated tech for all sorts of rap-inspiring, fun-lovin’ criminal activity.

The tool basically allows users to transfer money through a mobile application. it can kick off your account if you’re naughty, but appears not to worry if you just set up another one. According to now suspicious Q4 earnings report Block says there were some 51 million monthly transacting actives, a 16% YoY improvement on the previous quarter (and that’s just December 2022.)

For all the detail, the rap songs and a compilation of them as well as more on what Hindenburg found and thinks of the App, keep reading…

So the app was a big focus of Hindenburg’s 24-month snow job, with the firm also claiming Cash App was used to facilitate millions in fake US Gov pandemic relief payments.

Former Block employees were interviewed in the Hindenburg report, revealing their concerns about this kind of stuff were internally suppressed by management.

Core to the issue is that Block has 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.

Even when users were caught engaging in fraud or other prohibited activity, Block blacklisted the account without banning the user. A former customer service rep shared screenshots showing how blacklisted accounts were regularly associated with dozens or hundreds of other active accounts suspected of fraud. This phenomenon of allowing blacklisted users was so common that rappers bragged about it in hip hop songs.

Block obfuscates how many individuals are on the Cash App platform by reporting misleading “transacting active” metrics filled with fake and duplicate accounts. Block can and should clarify to investors an estimate on how many unique people actually use Cash App.

CEO Jack Dorsey has publicly touted how Cash App is mentioned in hundreds of hip hop songs as evidence of its mainstream appeal.

And here’s the compilation they put together. It’s pretty impressive. And also uses bad words – a heads up.



I am Jack’s vengeful spleen

Block Inc’s value collapse is best described by our competitors at Bloomberg. They’re doing pretty good.

According to our mates at Bloomberg’s Big Billionaires Index, At Jack’s now worth just US$4.4 billion following Thursday’s 121% haircut.

On the plus side, he’s needed one lately.

The good news is Jack’s not taking this lying down.

Block Inc naturally did the Adani playbook and screamed about the report being “factually inaccurate and misleading” and that it was lawyering up vs the short-seller.

Shares of the San Francisco-headquartered company, which has its secondary listing here,  watched the stock plummet to its lowest since er, about 4 or 5 months ago (November 2022 at A$86.30!)

Block’s U.S. shares (SQ.N) fell 15% on Thursday, coulda been worse.

Block had inflated user metrics, and that the stock has downside of 65% to 75% “on a purely fundamental basis.” The company denied the allegations and said it plans to explore legal action against the short-seller.

I am Jack’s broken heart

This is Block Inc’s investor day. Boy. The energy in the room is just crazy verging on fraudulent:

The allegations come about 24 hours after Jack’s company delivered its 2022 corporate social responsibility report, which waffled on about Block’s levelling f the financial playfield and it’s ‘raison d’etre’ being economic empowerment using “lending solutions that improve access to credit for historically underserved groups…”


Oh there’s more irony here than David Cronenberg’s 1989 disturbathon Dead Ringers.

Or is it actually that Hindenburg is getting damn good at this. The short seller let the ‘we’re saving the world’ report drop, and then dropped theirs.

Mid banking crisis as the punters head for the hills, Hindenburg retorted that Block isn’t embracing the poor and downtrodden, but that the firm is really just embracing criminals.

Hindenburg of course, likes to do it’s own Robin Hooding – unmasking the fiscally devious seems like its putting one in for the little guy, but naturally when you stand to gain a veritable fortune from the misfortune of your targets, the ethical razor’s edge is most slippery.

Adani one bites the dust

But these guys have a little cache. Back in January Hindenburg Research achieved a selloff in the stock of Indian billionaire Gautam Adani’s conglomerate of family companies with a huge report detailing allegations of fraud and stock manipulation.

The report on EV maker Nikola Corp in late 2020 eventually led to the arrest and criminal charges against the Nikola founder, Trevor Milton. He got done in October for defrauding investors.

The Block allegations are a long way from being proven, and while the short-seller has a good rap for doing its legwork thoroughly, the motivation makes for deserving bedfellows. At Jack, who co-founded Block (née Square), Inc is the fintech’s largest shareholder with circa 8% equity.

Matt Simpson, senior market analyst at City Index and always eager for a financial pun, told Stockhead traders have been in a “sell first, ask questions later” mode since the US banking crisis started earlier this month.

“So this seems to be a well-timed attack by Hindenburg which puts Block on the chopping block,” an excited Matt told Stockhead with a wink.

Afterpay: We are Jack’s transformative integration for a new economic paradigm

“…without the threat of rolling in debt.”

This is painful to watch, BTW. But fairly enlightening.

How Afterpay works

Firstly, Block doesn’t need, want (or pick one) to disclose the volume of sales being made on Afterpay’s platform.

But according to Block’s annual report, the revenue contribution looks like being about circa $US19.5 billion.

Afterpay and man of its BNPL ilk basically work as a snazzy tech-dressed payments intermediary between retailers and customers. Afterpay pays the retailer upfront for the goods – and then the customer is in the pocket as it begins to pay back Afterpay.

You get the instant gratification of your purchase, Afterpay gets your pledge to make good on the 4 x fortnightly payments over eight weeks.

Pro: These payments are of equal value for each order and are interest-free.

Con: Afterpay charges merchants who offer the service, and like an evil video store from days of yore – late fees to them who don’t keep up with payments.

Actually, are we Jack’s antipodean bile duct?

According to Hindenburg, Block’s US$29 billion takeover of our No 1 buy-now-pay-later firm Afterpay “was designed in a way that avoided responsible lending rules in its native Australia.”

The Marrickville-based Aussie consumer advocates, Choice are not fans of BNPL or Afterpay.

In more excellent recent work from that delicate corner of Sydney’s west, Choice says the recent collapse of online retailer Brosa, and its rapid acquisition by Kogan, has left a fair whack of Brosa customers in the cold-hearted hands of Afterpay (and BNPL broham Zip (ASX:ZIP)

Choice says these users face ongoing payments to the BNPL’s despite Brosa being dead in the water and with little hope their orders will ever arrive.

The buy now, pay later businesses say they’re contacting affected users and offering refunds, but the users tell a different story.

Continuing payments – for nothing

When Brosa fell into voluntary administration before Christmas, Choice says some $10 million due to some 5290 people were undelivered.

Kogan – always good for a bargain as the brochure claims – snapped up the once $60 million Brosa for $1.5 million.

It turned out that 2790 of the out-of-pocket customers had already bought goods via BNPL and they couldn’t be located in warehouses, which means neither goods nor a refund would be forthcoming.

Meanwhile the customers say that watching Afterpay or Zip Pay, automatically deduct payments for these from their accounts “has been a bitter pill to swallow.”

Fraud? Probably not.

Just mean? Possibly.


Jack Dorsey

Full name: Jack Patrick Dorsey

Date of birth: November 19, 1976

Place of birth: St. Louis, Missouri

Zodiac sign: Scorpio Age: 47 years

Nationality: American

Descent: Irish, German and Italian (look out!)

Parents: Tim and Marcia (née Smith)

Education: Bishop DuBourg High School, University of Missouri–Rolla, New York Uni

Religion: Catholic probably

Twitter: @jack (and if that’s not the coolest handle you can handle…)

Relationship status: Single

Occupation: CEO of Block Inc

Famous for: Co-founding Twitter and Block (née Square), Inc

Primary residence: Sea Cliff, San Francisco