Hindenburg Research stated it had taken a short position in Jack Dorsey’s payment firm; Block shares fell roughly 15% by Thursday’s close. A short report on this tech stock fall claimed that Block’s inadequate oversight of the platform enabled illicit activities and artificially boosted Cash App’s transactional user base. According to Hindenburg, Block’s internal procedures take a “Wild West” approach to regulation.

Over two years, Hindenburg made an investigation on the block shares to gain evidence that Block exploited the people it said it was trying to aid. According to the research agency, the “unbanked” consumers who engage in criminal or illegitimate behavior are the sweet spot for Block’s Cash App. In addition, Hindenburg claimed that Cash App’s compliance procedures were inadequate.

The two-year Hindenburg probe included interviews with several former employees who detailed how corporate concerns were stifled, and consumer complaints were dismissed despite “criminal conduct and fraud running rampant on its site.” Allegations of financial misreporting were also brought to light. The comprehensive analysis includes data culled from the company’s internal systems and communications among staff members.

Hindenburg claimed that interchange fees were for up to 35 percent of Cash App’s revenue, or about $892 million and that this amount of money should be limited by law. Hindenburg claimed that Block was able to circumvent the revenue cap placed on large financial organizations by channeling money through a smaller bank.

An attempt to expand Cash App’s user base by deliberately breaking Anti-Money-Laundering (AML) regulations were noted in the study. “40%-75% of accounts they evaluated were false, engaged in fraudulent activities, or had been additional accounts related to a single individual,” Hindenburg claimed.

Block has replied to the Hindenburg study by saying it will cooperate with the SEC and consider legal action over Hindenburg Research because of the report’s inaccuracies and misrepresentations regarding the Cash App business.

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