Block, with Amrita Ahuja as CFO, faces fraud allegations
Image of Block’s Cash App. Courtesy Wikimedia Commons.
March 23, 2023
In a report released today, New York based Hindenburg Research alleges that Block shows a “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.”
Block is a San Francisco based financial services which says it is building “tools to help more people access the economy.” Its stock, which had a market value of $45 billion before the allegations, dropped by 15% today. In a statement, Block stated that the Hindenburg report is “factually inaccurate and misleading.” Block added that it is “confident in our products, reporting, compliance program, and controls.”
Block’s services include Cash App, which enables anyone to “easily send, spend, or invest their money in stocks or Bitcoin.” Another service, Square provides commerce solutions and banking services to businesses.
Hindenburg’s 18,000-word report is titled, Block: How Inflated User Metrics and “Frictionless” Fraud Facilitation Enabled Insiders To Cash Out Over $1 Billion. The firm discloses that it has a short position in Block’s stock, implying it hopes to benefit from a decline in its stock price.
Hindenburg says, in addition to using fundamental analysis, its “most impactful research results from uncovering hard-to-find information from atypical sources…Accounting irregularities. Bad actors in management or key service provider roles. Undisclosed related-party transactions. Illegal/unethical business or financial reporting practices. Undisclosed regulatory, product, or financial issues.”
Hindenburg focuses on Block’s Cash App platform which is said to have “51 million monthly transacting active users and low customer acquisition costs.” It alleges that 40%-75% of the accounts “were fake, involved in fraud, or were additional accounts tied to a single individual. Core to the issue is that Block has embraced one traditionally very ‘underbanked’ segment of the population: criminals.”
The Cash App, Hindenburg alleges, is used “to scam, traffic drugs or even pay for murder” and sex trafficking, including of minors.
Hindenburg says it set up accounts using false names Donald Trump and Elon Musk and “were easily able to send and receive money. We ordered a Cash Card under our obviously fake Donald Trump account, checking to see if Cash App’s compliance would take issue—the card promptly arrived in the mail.”
Use of Block’s Cash App boomed during the 2020-2021 pandemic. This, Hindenburg alleges, was largely due to “Block’s role in facilitating pandemic relief fraud.” The new business boosted Block’s stock, which rose more than six-fold in eighteen months – from around $50 in March 2020 to around $270 in August 2021.
“As Block’s stock soared on the back of its facilitation of fraud,” Hindenburg alleges, “co-founders Jack Dorsey and James McKelvey collectively sold over $1 billion of stock during the pandemic. Other executives, including CFO Amrita Ahuja and the lead manager for Cash App Brian Grassadonia, also dumped millions of dollars in stock.”
In February this year, Ahuja, 43-years-old, was named to the additional post of chief operating officer at Block. “This allows us to be far more focused and efficient as we work to achieve our goals,” Chief Executive Jack Dorsey said in a statement.
In 2019, Ahuja joined Block – then known as Square - as its Chief Financial Officer. In addition to managing a company’s finances and issuing financial statements, CFOs are typically responsible for overseeing the financial safeguards and fulfilling financial regulatory requirements.
Earlier, for eight years Ahuja was at Blizzard Entertainment, a leading global developer and publisher of interactive software products and entertainment content with over $2 billion in annualized revenue. She served in several finance and strategy roles at the division of Activision Blizzard, including Chief Financial Officer and Senior Vice President of Investor Relations; she started as a VP of Strategy and Business Development.
Prior to Blizzard, she held various roles: Director at Fox Networks, 2007-2010; senior analyst at the Walt Disney Company 2003-2005; analyst at Morgan Stanley, 2001-2003; and summer associate at McKinsey, 2006.
Ahuja received her M.B.A. from Harvard Business School, 2007, and her A.B. in economics from Duke University, 2001. She graduated from Shaker Heights High School in 1997.
Ahuja is on the board of Airbnb and Discord, a gaming platform which is privately held. She owns Block stock currently worth about $15 million, in addition to options to buy the stock.
Since 2016, Hindenburg has published critical reports on several companies. On its website, it lists eighteen cases where its research led to declines in company valuations and fines and other punitive actions by regulatory authorities. In January this year, it issued a report alleging fraud at India’s Adani Group.
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