Block says Cash App has 44 million verified monthly users after Hindenburg report

Block Inc said on Thursday 44 million of its more 51 million monthly active customers on Cash App were verified through its identity program as of Dec. 31.

The payments firm also estimated that the verified accounts constituted roughly 97% of Cash App inflows.

The disclosure follows Hindenburg Research’s report last week that former Block employees estimated 40% to 75% of accounts they reviewed were fake, involved in fraud or were additional accounts tied to a single individual.

After taking a short position in Block, the report alleged that the payments firm led by Twitter co-founder Jack Dorsey overstated its Cash App user numbers and understated its customer acquisition costs.

Block has denied the allegations, saying it would explore legal action against the short seller for its “factually inaccurate and misleading report” that was “designed to deceive and confuse investors”.

Hindenburg, which was also behind a market rout of more than $100 billion in India’s Adani Group in late January, had said Block “obfuscates” how many individuals are on the platform by reporting “misleading transacting active metrics filled with fake and duplicate accounts”.

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However, Wall Street’s analysts were sanguine about the outlook for Block and said most of the issues raised by Hindenburg are known and the accuracy of the company’s reported financials has not been questioned. “It is difficult to both refute or confirm any of allegations being made, but these allegations certainly will get regulators attention,” Piper Sandler analysts had told its clients on March 23.

The short seller’s move is seen as a challenge to Dorsey, who co-founded Block in 2009 in his San Francisco apartment with the goal to shake up the credit card industry.

Block’s shares were up more than 2% in afternoon trading.

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