Hindenburg says Block response confirms it inflated Cash App user counts

FILE PHOTO: The logo of Cash App is seen at the main hall during the Bitcoin Conference 2022 in Miami Beach, Florida, U.S. April 6, 2022. REUTERS/Marco Bello

(Reuters) - U.S. short seller Hindenburg Research said on Friday Block Inc's response to its allegations confirmed it had reported inflated user counts on its Cash App to investors for years.

The payments firm led by Twitter co-founder Jack Dorsey said on Thursday that 44 million of its more than 51 million monthly active customers on Cash App were verified through its identity program as of Dec. 31.

"Block's newly reported internal estimates also show that its previously reported 51 million monthly transacting actives as of December 2022 represented a 16%-31% inflation of its actual estimated internal user counts," Hindenburg said in a note published on its website.

Block did not immediately respond to a Reuters request for comment.

The disclosure follows Hindenburg Research's report last week that said 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, Hindenburg alleged in the report that the payments firm overstated its Cash App user numbers and understated its customer acquisition costs.

Short sellers typically sell borrowed securities and aim to buy these back at a lower price.

(Reporting by Manya Saini in Bengaluru)

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