Block: Inflated user metrics and “frictionless” fraud facilitation | Hacker News Reader

Block: Inflated user metrics and “frictionless” fraud facilitation

hindenburgresearch.com

471 pointsboh301 comments

While this doesn't look great, it doesn't really seem up to the standards of past Hindenburg reports. Block's main product is credit card processing and point-of-sales, for retailers, and they have a reputation for being the easiest to use and deal with.

I could easily believe that they are not doing their KYC work and that the feds will soon make them do so, but it doesn't really seem to add up to the company being a "fraud".

Which, to be fair, the Hindenburg headline doesn't say, it's "Block: How Inflated User Metrics and “Frictionless” Fraud Facilitation Enabled Insiders To Cash Out Over $1 Billion". Facilitating fraud (by not doing enough KYC, etc.) rather than the company being a fraud.

> it doesn't really seem to add up to the company being a "fraud"

The allegations in this report add up to wilfulness. That could result in the company’s money transmission licenses being revoked.

That's a stretch. They'll be able to remedy. Maybe they'll get fined. I'm sure they're a lot more steps in between before getting shut down.

Cash app now makes up the majority of Block's revenue.

https://s29.q4cdn.com/628966176/files/doc_financials/2022/q4...

page 74 of their 2022 Q4 10-K shows a per segment (between Square and Cash App) breakdown of revenue

Revenue yes, profit no (though profitability is very close to evenly split).

For revenues, Square is $7B vs Cash App is $10B. However, the gross profit is both Square and Cash App are $3B.

Very interesting, thanks for pointing me to that document. It does show Square with +29% growth in net revenue (+30% profit growth), whereas Cash App shows 14$ decline in revenue. They managed to still get profit growth in Cash App by cutting cost of revenue even faster than their revenue dropped, but that does not seem to bode well for Cash App being able to sustain greater KYC due diligence, etc. I think they may have a better future in the Square-related business than in the Cash App part, especially if fed pressure on them to do more KYC in Cash App grows (which I would guess it will).

"Cash App shows 14%" rather than "14$", obviously, but it's too late to edit now. :)

I'm a former block employee who has seen first hand the documents that proves these allegations. Marketing intentionally preyed on poor communities to promote cash app. They would refer to cash app as "payments for poor people". What's worse is Jack uses a large part of the companies budget to fund his personal Bitcoin projects.

If you voiced any concerned you were silenced and eventually terminated.

> What's worse is Jack uses a large part of the companies budget to fund his personal Bitcoin projects.

I also worked at Block until earlier this year and AFAIK, the % of Block's overall operating costs spent on Bitcoin side projects is very low. Maybe 1% or something like that.

FYI if anyone is interested I can prove it -- Cash App is engaged in a massive stock trading fraud.

I noticed one day that my books were off (down) by 1 penny. When I dug into it, I figured out that Cash App is providing their customers with conflicting reports for their stock sales.

In the app, the sales report rounds pennies up, in the actual sale, whose records are only available through more complex data export process, the penny in the sale is rounded down, and they are keeping the difference.

I found the rule in the legal terms which states that the calculation in the app presented to users is the correct one, and the penny is illegally missing.

This is for every trade for every one of their users. The aggregate amount of money is huge.

Edit: I just looked back at my analysis and now remember in some cases the missing money is more than one penny. If anyone would like to contact me one on one I can provide more proof.

This is at the core of Superman III. Richard Priors' character notices his paycheck gets rounded down, he writes an app to harvest up the rounded down tenths of pennies...

I have often thought this is the business model of most payment apps.

Isn't this also the premise of the Office Space scheme?

... which explicitly references Superman III as the source.

Which is one reason I suspect it might not be true: not because Block is necessarily honest, but because everyone and their dog has heard of this scam and it's the first thing people would think of.

The twitter thread they published appears to contain supporting evidence. Or perhaps there was enough smoke to justify the short position which they covered at market open for a nice return.

Company I write software for had a small subset of customers begin complaining about fractional cents when New Jersey implemented a sales tax of 6.625%. To be fair, company gains and loses on the half cents this caused were in equal measure. But I was commissioned to turn literally everything from UI to database to receipts and invoices and annual reports into thousandths instead of hundreds.

This is a fuckin dog boarding company I work for, not a bank. Because no, you can't screw your customers a half penny at a time... it's on you to fix the accounting and make it right.

You reported this to the SEC, right?

If you cash out of the app do you get the full balance or the app balance?

That's the problem, when you cash out, you don't get the net amount listed in the app. You get a penny or sometimes even more than 1 penny less. The amount you get corresponds with the real net amount number that they've applied different rules to which is only available in your account export, only available through their website.

Right but does it match the net export number which is the legal one? or the fake one?

According to their terms, the correct, legal amount is the amount reported in the app. The illegal (and mismatched) amount in their export is what's being paid out.

Not that this is acceptable, but is this just an issue with how the app is reporting money and you actually have the correct funds? Or is money actually being "absorbed" by the platform?

Both are bad, one is far worse.

I have nothing to add except to say that that sounds like what they did in Office Space.

This seems like a typical salami attack? [1].

[1] https://en.wikipedia.org/wiki/Salami_slicing_tactics

can almost gaurantee you this is not fraud its an odd lot exception. If you dont do trades in round lots brokers are allowed to bunch your orders together and not give you best execution.

There is no legitimate scenario where they would be reporting the Net Amount for the same sale in two places with different numbers.

I am hesitant to call it fraud yet, but the situation you are describing isn't what the parent comment is talking about.

The issue isn't that it was executed at a higher price than expected or that it was "rounded up" in general. The issue is that for a single completed transaction, in one place (general app UI) it is reported to have executed at one price, and in another place (the data export process) it is reported at a different price.

"we round them all down and just drop the remainder... into an account that we own."

https://www.youtube.com/watch?v=yZjCQ3T5yXo

Isn't this the plot of Swordfish?

Trivia: The title of the movie “Swordfish” is named after an old Marx Brothers routine from the movie “Horse Feathers, “ which revolves around an illegal speakeasy’s password to get in.

Which is, of course, “swordfish.”

https://www.youtube.com/watch?v=ySqec8WrEQQ

…they’re doing a SupermanIII??!?

The fact that this is upvoted to the top of the page goes to show how little techies know about banks and trading and the financial system in general. No Block isn't running some elaborate Office Space style scam. If you open Vanguard or Fidelity or whatever else you will have the same experience. Trades are executed and settled by clearing houses and in-house accounting and audit departments, not iOS engineers. There is a lot of complexity behind the scenes that the app is hiding from you. Getting the estimate off by a few cents (say because the front end used the wrong floating point standard and/or only considered 5 decimal points instead of 6 in their calculations) is perfectly normal.

As I stated elsewhere:

> There is no legitimate scenario where they would be reporting the Net Amount for the same sale in two places with different numbers.

The net amount reported in the app isn't an estimate, nor is it ever updated.

If you do the math, the amount listed in the app, according to their own report, is the correct amount. The final asset price X the final asset amount, as frozen in their long-term reports, is the amount listed in the app.

There is no hand-waving financial explanation for this discrepancy.

> Block isn't running some elaborate Office Space style scam

I have black and white evidence that they are. Stealing isn't necessarily elaborate. I'm surprised you find this hard to believe when TFA is a report about other types of fraud by the same company.

> how little techies know about banks and trading and the financial system ... There is a lot of complexity behind the scenes

Your comment is a little condescending, I don't think it's a big secret that trades get settled.

Your allegation is that Block is showing you two different numbers, and pocketing the difference. Can you prove that? Does it show up on their financial statements? Or are their auditors involved in the grift as well?

Or could it be that the number in your bank account is consistent with what the buyer/seller on the other end of the trade is getting?

Can I prove that: yes. That was my opening statement. I have their statements, and I have my account transactions.

There are three key numbers here: the net amount reported in the app, the net amount listed on their buried report, and the amount paid. The net amount in the app is correctly calculated according to their own report of settled asset value and amount. The net amount in this buried report and amount paid do not match that.

Since these numbers again, are not estimates and never change, including after any settlement period, there is no legitimate explanation for the discrepancy.

You mention audits as if audited companies never commit financial crime.

With wirecard even the auditors auditor allowed fraud! Coincidentally the ceo complain about short selling

They copied a page out of Office Space with the penny trick?

This is bad for Block. I hope. It's incredible that since 2008 it actually seemed immensely easier to skirt regulations and laws (under the banner of 'innovation'), and not just in finance. Just about all of silicon valley seems to have run the longest and broadest grift we've seen.

This year's gonna get real interesting.

> Just about all of silicon valley seems to have run the longest and broadest grift we've seen.

What do you mean by this

Wouldnt know what the OP refers to but silicon valley has been skirting regulations and running as close to a ponzi scheme as humanly possible, the likes of uber with blitzscaling, esentially growing their userbase with venture capital only to increase the amount of venture capital they can get to 'eventually' make a profit. Or SVB wanting to not be regulated because they hold less than 250B only to fail with terrible consequences. Then theres the numerous crypto startups that promise return on stake funded by new depositors to pay the old depositors. Money was cheap but in an economic downturn any weakness will result in investors leaving, cash drying up. So whoever cannot show profits will quickly wither and cause chain reactions in similar weak companies. I'm sure you can find an amazing list on hindenburg and you'll see most of them are tech companies because thats where the biggest venture capital pie was between 2008 and now.

The “innovations” of many (but not all) post-2008 unicorns are more about creating a legal grey area to bypass regulation than they are actual technological advances. Uber and Airbnb are prime examples. If Uber was forced to used licensed cab drivers or Airbnb forced to use licensed hotels, you would see the breadth of what these companies actually bring to the table, which isn’t nearly as much as their valuations would indicate. That’s before we get into the adverse externalities these services can create (looking directly at Airbnb here)

Yes, if Uber was forced to use the government cab cartel, then it wouldn't be better than the taxis. The entire point is they made taxis that actually work by getting around the taxi cartel.

Outside the US, well, Uber is not directly emplying their drivers. If Uber had all drivers on their payroll, taxi cartel or not, Ubers story, and financials, would look a lot different, wouldn't they?

People still choose to be Uber drivers, despite jobs that pay minimum wage existing. So, I'd bet the story would be way more complicated than your picture.

The main thing they get from offshoring the driving is scalable renting of capital. But well, I have no idea if one could not just rent it without the labor.

Does Uber use government maintained streets as part of its business?

But that's only half the story.

The other half is that they used nearly free money provided by the US central bank, routed through VC firms, and engaged in anti-competitive predatory pricing.

The pricing issue is stark and impossible to miss. I produce events for a living and I'm in a different city every week. The cost of an uber ride now is invariably 2-3x higher than it was a few years ago at minimum sometimes 5-10x higher.

I remember tooling around Chicago and getting fares that were like $2.17 and $3.22 a couple years ago. Any fares within downtown Brooklyn were $8, period, often discounted via a promo to $4-5. Now they're routinely $25, maybe $15-18 on a slow day.

That's where all the VC money went, and it simply wasn't possible to compete with that unless you had access to all that free money too, which local business didn't.

Did they make it work though? Function yes, profittably, not yet.

Silicon Valley creates companies with unsustainable business models that have to rely on tax/labor/regulatory loopholes. They pretend that profitability is due to actual technological innovation while negatively affecting actually functioning companies who don't have the same access to capital (bcs real companies can't pretend like they're capable of infinite growth). What most Silicon Valley companies wind up being are financial instruments that function exclusively as exit strategies. The Silicon Valley business is to essentially create innovation narratives they can sell without facing the consequences of poor business practices.

I always think about uber. The moment that they have to start treating drivers like employee's they can't make money because self driving cars are still a dream and the taxi business is cut throat and always has been.

> moment that they have to start treating drivers like employee's they can't make money

Revel, in New York, has employees and does fine.

Define "does fine". Spending and losing VC money doesn't count.

> Define "does fine". Spending and losing VC money doesn't count

Then Revel does fine.

I'm guessing by the rhetorical nature of the response, the details of "fine" aren't clear.

> the details of "fine" aren't clear

They’re not, particularly since “spending and losing VC money” is often tossed around Uber, which doesn’t make sense, since it’s no longer VC backed.

I’m interpreting your sentiment as having a cash-flow positive operating model. Ridesharing absolutely works on a fundamental level with enough gross profit to fairly compensate drivers. (It doesn’t if drivers can log on and off at will, nor in low-population density or poorer areas.)

I'm sure we'll see plenty of "gross profit" in their non-GAAP financial statements. I guess it doesn't take much to have people defend companies they know so little about in industries they have no experience in. Marketing really works I guess. Btw the Revel NY ridesharing isn't going so well:

https://www.wsj.com/articles/new-york-city-commission-thwart...

> sure we'll see plenty of "gross profit" in their non-GAAP financial statements

You claimed the “moment that [ridesharing companies] have to start treating drivers like employee's they can't make money.” I showed a counterfactual. You’re doubling down with hunches and suppositions.

> Revel NY ridesharing isn't going so well

You’re citing an article from 2021 on the TLC blocking Revel’s application for more vehicles [1]. (It was since approved.) How is the government telling a company to stop growing an indictment of their business model?

[1] https://www.wsj.com/articles/new-york-city-commission-thwart...

Many transit solutions are successful in NYC but not elsewhere.

> the taxi business is cut throat and always has been

For drivers, yes. But in many cities the taxi system was engineered so that the owners of "positions" got lavish profit.

"bcs real companies can't pretend like they're capable of infinite growth"

WeWork is a real company and managed it for a while

More like 1998. But yeah, the model of tech-washing has increased in popularity since then. The example that most readily comes to mind is Uber, and they started in 2009.

I used to hate on Uber on principle (and what I read). But Uber definitely added something positive to society. A city with Uber experiences a reduction in DWI incidents. Transportation on demand is not some crypto fluffware. Let's remember that the very premise of tech utopia was [addressing] regulatory capture by ineffective parties. That also is a legitimate concern.

So the question (if we suspend judgement of these initial tech waves) is: if ignoring and bypassing regulations to introduce new approaches is also broken, what is the solution to the original problem? As an illustration, examine a hypothetical of when or if civic centers would themselves modernize transporation for hire regulations, mechanisms, etc.

> Just about all of silicon valley seems to have run the longest and broadest grift we've seen.

I would say nearly all of Silicon Valley tech startups. Around 90% them are a complete SaaS grift and are also eternally unprofitable and are very good at losing money.

Hence why they are solely dependent on begging for VC money every month to pump the pyramid scheme that recently collapsed a week a ago. We saw which startups were affected and would have instantly been bankrupt had it not been for them beggeing to the government for a totally-not-a-pseudo-bailout scheme to 'save' them.

To see who was caught in the fallout, we needed catalyst events such as the start of the market crash in November 2021, the collapse of crypto in 2022 and now in 2023, a large tech bank (SVB) becoming insolvent and failing.

> It's incredible that since 2008 it actually seemed immensely easier to skirt regulations and laws (under the banner of 'innovation'), and not just in finance.

Now the grift has continued to spread into the AI hype squad with everyone and their bots spinning their own ChatGPT SaaS startup. Don't be surprised to see them falling like dominoes since the real winner in this AI hype is OpenAI. Not the startups built around it.

Indeed, VC's loaded with 'free' money pumping whatever idea could bring in the consumers enough to keep a narrative spinning.

I haven't seen any particularly strong profitability case for ChatGPT and the like yet, unless you call ad dollars from promoting "ChatXX does this amazing trick!" as proof.

People barely even questioned the ludicrous wages being thrown around in silicon valley, supported by 'funding rounds' and silly valuations of future growth.

But, it all sucks because the people that will lose are the last-in-chain investors and the to-be-unemployed. Not the VC crybabies currently out there complaining about their need for protection by the establishment they protest.

Yeah. I used to work outside the valley, until 2008. I moved to San Jose to work with friends I worked with from Netscape.

Until I moved, I earned five figures, you know a bit more each year, and was happy. I had a house, a big spacious house by San Jose standards, and a nice town with friendly friends and so on. When I started in SV, they raised me to USD 120,000 and the HR recruiter literally apologized for it not being more. Since then it has gone up about four x, for no really good reason that I can see, since it is fun work I would do for much less. Only when you get into profit per worker does it make sense.

And that isn’t due to some moral failure entirely, but something about the weird asymmetries that networked technology seems to facilitate. One little neighborhood, but services and products for dozens or hundreds of countries. Each time a country is added to the network, the winner takes some more.

"CEO Jack Dorsey has publicly touted how Cash App is mentioned in hundreds of hip hop songs as evidence of its mainstream appeal. A review of those songs show that the artists are not generally rapping about Cash App’s smooth user interface—many describe using it to scam, traffic drugs or even pay for murder."

Hindenburg made a music video compiling the references that is...uh...worth watching: https://www.youtube.com/watch?v=StjWk3Mj-M4

That was indeed worth watching.

It's interesting to see it in the context of Bitcoin. It's just what people do when they can pay for things and services more freely.

This feels like awkward sponsored product placement like you see in pop music videos.

Correct.

A scam here in Baltimore that keeps occurring is that the squeege kids will run up on someone unsuspecting and start cleaning their windshield.

They will pressure the driver for a tip, and the driver will say they don’t have cash of course.

They will say that’s cool, you can send me a tip. They ask the driver for their phone so they can look up their cashapp for them, and bam the driver got scammed.

What’s happening is that the squeege kid is looking up his account on your phone, and then sending himself like $2,000.

People have complained that cashapp won’t help, and their bank isn’t letting them dispute the charge.

In my opinion, this is clearly an anti pattern on Cashapps end, and I would imagine at least one engineer would have spotted this vulnerability by now. I would think that Cashapp would build in a simple pin confirmation before a stranger could wire themselves a couple thousand dollars. This has bugged me for the last 2 years lol

I don't think you have anyone to blame if you give your phone with a logged in money app to a stranger who is begging for money.

It’s a high pressure situation in the middle of rush hour traffic. They like to target unsuspecting older white people, and unaware females.

If you get aggressive, they will spit on your window, break your wipers off, and hit your car.

Things can get really ugly if you get out of your car and try to confront them: https://www.thebaltimorebanner.com/community/criminal-justic...

This is not CashApp's responsibility to fix any more than it would be the US Treasury's responsibility to fix if I hand them a $100 bill.

If they ask for $10 and you give them a $100 asking for change yes it is the police's job to fix.

Cashapp doesnt bear the responsability of highway robbermen

So you’re validating what Hindenburg research is saying correct?

A bunch of their transaction volume is scam money that is hard to reverse, and it’s not Blocks fault as you say.

> I don't think you have anyone to blame

It’s a negligent move for sure, but a crime is still a crime.

Having someone steal your money without your consent is still theft and they are still the perpetrator of the crime.

The victim-blaming mentality on the internet is wild. Being negligent or naive doesn’t shift 100% of the blame to the victim when a crime occurs.

And then you call them to complain that someone was able to drain your bank account, and they say “sorry, you’re on your own”

You're focusing on whether it's the phone owner's fault or the thief's fault, my point is that it isn't the app's fault.

It drives me nuts that anytime you indicate that a victim behaved unwisely and caution others to behave wisely to help avoid being victimized in the same way, somebody always gets their hackles up about “victim blaming”.

Two things can be true at once: the perpetrator of a crime is the one responsible, AND the victim might have avoided victimhood had they acted more prudently.

Humans communicate in stories. The “cautionary tale” or example of folly that led to woe is a pattern as old as our species could talk.

It is NOT true that cautioning people not to act imprudently, and providing an example, is “victim blaming”. I don’t hear anyone saying that we should not pursue and prosecute the perpetrator.

So just can it with the hair trigger “victim blaming” accusation.

> I don't think you have anyone to blame if you give your phone with a logged in money app to a stranger who is begging for money.

> caution others to behave wisely to help avoid being victimized in the same way

In this case though this is not a caution to others, it's literally a statement of victim shaming/blaming.

> The victim-blaming mentality on the internet is wild. Being negligent or naive doesn’t shift 100% of the blame to the victim when a crime occurs.

Nobody is claiming the criminals are blameless or that a crime is not a crime.

It's astoundingly dumb to hand a piece of electronics worth several hundred dollars to someone in such an interaction, even if they cannot use it to electronically steal your money.

The criminal is a criminal, and the person who hands their phone to someone under these circumstances is mind bogglingly naive. The former fact is tautological so it's natural to focus on the latter part, the one that boggles the mind. How could anybody possibly fall for this? Were they very young? Were they old? Were they distracted or drunk or lulled by the perpetrator? Were they out of towners? Were they intimidated? One wonders.

Banks siding with Silicon Valley firms and not the bank customer is common. Try blocking a vendor that tricked you into signing up. Bank won't help.

That is entirely on you if you give away your phone to those kids. I would think they would just run away with it

You’re minimizing major fraud being committed by juveniles, and it’s easy money for them lol.

It is not fraud, it is theft.

It has nothing to do with Cash app. It could just as well be Zelle, or PayPal, or Venmo, or physical cash.

Zelle, PayPal, and Venmo have more in place to trace or recover illegal transactions, or at least to make creating and deleting accounts to move illegally acquired money more difficult.

The link's whole thesis is that Cash App doesn't really care, which is why criminals prefer it. Being so radically frictionless for the underbanked also facilitates scams, including those that distinguish between theft and fraud.

I was born outside the US and we had local gangsters that would walk up to you in the middle of the street and try to “sell” you a brick. Like a brick that you build a house or wall with. They would show it to you, and tell you that it was a great brick and that you should buy it. If you told them you didn’t want the brick, they would assure you that yes you most certainly do want the brick. You then bought the brick from them. You can probably image what the brick was used for if you refused to purchase it.

I'm not familiar with this situation, but I'm assuming that whoever is doing this isn't there to "clean" your windshield, and that the entire "transaction" is imbued with the implicit threat of violence and intimidation. You're essentially being robbed through other means. If this isn't the case, then I'm happy to admit that I'm wrong, but that's how it reads to me.

This happened to a friend of mine in Atlanta.

Someone tried to sell her a rock at a traffic light. When she wouldn't buy it, they used it to smash her rear driver's side window and grab whatever they could from inside the car.

Risky move, given that Georgia is a constitutional carry state and castle doctrine extends to occupied vehicles.

Im pretty sure most guns are owned by hoarders sitting in a cabinet somewhere they aren’t likely to be in someone’s car who is ready to use it. Gun owners are a minority and they are just very enthusiastic individuals that they seem like a larger contingent than they are.

In 2020 this poll found 32% of Americans report owning a gun, and 44% live in a household with one. So not "most", but not insubstantial either.

https://news.gallup.com/poll/264932/percentage-americans-own...

there are over 400 million firearms in the US in the hands of an estimated 100 million individuals

over two million background checks for firearms purchases are performed each month, and this number is rising, and the number of people who are being background checked for the first time is rapidly rising (fastest growing group - black women)

by 2030 there will likely be a half billion firearms in the US

there are more fully automatic rifles registered to individuals in Texas (40k) than are in possession of many NATO armies...for semi-auto pistols and rifles, Texas residents outgun most NATO armies by a substantial margin

these are stats that both gun advocacy and opposition groups will be happy to validate (each believe the numbers support their position)

anecdotally, it is very common here in Texas to read of traffic altercations in which both parties involved in road rage incidents were carrying in their vehicles...it is widespread

Posted elsewhere but https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3937627 has numbers to back some of this up

Also according to the Small Arms Survey, Texas has five times as many guns as the US military.

Though the US military ones are more likely to have select fire and fully automatic but those are only particularly useful in certain situations.

Mine is in my truck. So that's 1 data point.

Risky move, given that Georgia is a constitutional carry state and castle doctrine extends to occupied vehicles.

Not really. By the time a seat-belted person gets to their gun, whether in a holster, under the seat, in a purse, or in the glove box, the thief is long gone.

Real life is very different from the movies.

You are asserting that it takes a long time to get a gun out.

I remember a few years back there was some controversy about how police are trained to shoot first and one of the things that bubbled up then was a video (I think produced by someone teaching the police) of a seated driver drawing a gun and having it pointed out the window in a fraction of a second. The gun was in a holster down by the seat belt buckle. And the next instant it was pointing out the driver's window.

Makes sense for a seasoned criminal, of the type who might shoot a cop.

Joe Lunchbucket isn't likely to be so agile.

Statistically speaking, Joe Lunchbucket, is likely a better trained shooter than the police, most of whom only fire their guns once a year to qualify and have to meet lower accuracy standards than CHL holders in 32 states.

Why risky? Assuming the person with the rock knows this and is armed, they're probably ready for a would-be Rambo and they're much better positioned to shoot first, or at least they'll have the draw and be able to take your gun right off of you.

> I'm not familiar with this situation, but I'm assuming that whoever is doing this isn't there to "clean" your windshield, and that the entire "transaction" is imbued with the implicit threat of violence

not in the US - millions of people keep loaded guns in their vehicles

Do you have a reference on that number? I’d love to know what the number actually is.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3937627 has some numbers:

> During the Coronavirus pandemic, the number of concealed handgun permits has soared to over 21.52 million – a 48% increase since 2016.

Given that some states are "constitutional carry" (21 states) and do NOT require a permit if you legally own the gun, the actual number of people who HAVE a gun and can carry it would be higher than 21 million. They even do the math:

> To summarize, the total number of permits in the US is at least 21.52 million. Add in people who legally carry without a permit, and the number clearly becomes much larger. While 8.3% of the adult population has permits, the percentage of Americans who say that they carry most or all the time is about 5.4%.

5.4% of Americans is about 17 million people, the majority of which will carry when in their vehicle. (Note that legally and technically you are "conceal carrying" in many states if the gun is IN the vehicle, not locked, even if it is NOT on your person - so if you're married and YOU carry, you will want your spouse to get a CCW also even if he or she never carries, because if you're both in the car, the gun is in the center console, and you step out to get gas, your spouse is now concealing).

Yes, don't give your phone away, but it's also on CashApp if they allow large transfers with no further authentication, even if we're not talking about literal scams and you just mistakenly fat fingered an extra 0...

Ah, yes, it’s the people who got scammed who are at fault. Everyone should always be ultra suspicious of everyone around them, no happiness or fun allowed. \s

I want to live in a world where I can trust a random stranger, not suspect them of robbing me. Justifying some extra protections like a pin or a fingerprint check to finalize a transactions should not be this big of a deal.

I think that most other people would as well. Unfortunately, there are enough people willing to take advantage of that good will that you are a fool if you are not somewhat suspicious.

You do live in that world. You can trust random strangers but not ones the look like “youths” in Baltimore. Use your brain to asses the risk level.

Can you give me more detail about what physical characteristics define a "dangerous youth" in Baltimore?

Ones who are under 16, but are smart enough to intentionally extort drivers on the main thoroughfare to T. Rowe Price and Legg Mason’s headquarters lol

They are all actually pretty intelligent individually, and they come up with some pretty clever things to get into. A bunch of them come from rough homes, and they are usually taking the cash home to support their family, even at 15. They are supposed to be in school, but they skip to go squeege because they don’t feel like the things in school are relating to their struggle. They have tried the regular 16 year old jobs, but that doesn’t pay enough to cover their struggling mom and siblings. Instead of losing out to low wages and income taxes, they find it much easier to pick up a squeege from a gas station, and start making some instant cash in tips.

These kids are super smart lol. Pressure breeds diamonds. They know how to hack the Lyme scooters and ride around and commit crimes. They know how to scam you out of your cashapp balance. And they really know how to download and build burner handgun kits from Defense Distributed :(

If you choose a stranger at random, you can likely trust them.

If somebody chooses you, you're not choosing at random.

Technically yes, because you’re not choosing at all but they’re still random to me since they’re not from my circle.

It's not random at all. They're selected from the pool of people who will approach you.

Let's simplify. Say that 1 in a million people pull the stranger needing help scam, and will approach you given the opportunity. Everybody else will only approach you if they actually need help, which is rare, say 1 in a million.

So in that scenario 50% of the people approaching you are criminals, compared to 1 in a million who are actually criminals.

> I want to live in a world where I can trust a random stranger

This is and always has been utterly delusional.

I disagree and I think it’s a matter of perspective.

Furthermore, even if they have a bad design facilitating street thuggery, that has nothing to do with the business itself being a fraud.

I mean, it's also an anti-pattern with wallets if you hand them your wallet full of cash and tell them to take a tip. A PIN is not a bad idea though.

I think this might be an actual generational difference; I feel weird letting someone else use my phone or using someone else's phone now. I can remember a time when phones were much more communal - the family shared a phone, and public phones existed, and I wonder if older folks are a bit more locked into that way of thinking. Obviously a phone is much more than a phone now however.

The vast vast majority of people don't go around with a wallet full of cash for obvious reasons. If having the application installed is equivalent of going around with such a wallet, then at the very least it points to flaw.

I answer my wife’s phone from time to time and I always feel weird doing it, and feel that I have surprised the other end.

On the other hand, my phone causes ringing on my phone, my IPad and my work laptop: for the love of G-d don’t just watch it or tell me it is ringing, answer the damn phone. U less it says likely scam of course.

I don't know if it's a scam but there's been guys hanging around the local greyhound station with stories like "my phone battery died while I was on the bus, can I use your phone to call my buddy to pick me up". And I don't want to be a jerk but something about it felt a bit too pushy, and if I give then my phone I was probably never going to see it or them again. Now just giving it unlocked to a squeegee kid? Hell no, that's just plain naive.

I thought so too, but then I actually once gave my phone to someone in need, and they... just called someone and returned my phone back to me. I was actually expecting a trick. I guess we need to be more trusting sometimes, and help each other more often (I mean, losing a phone happens to people and can be a real problem)

I've had people ask to use my phone a few times in similar situations. So I just dial the number on speaker for them and don't hand them my phone.

Roll up windows, lock doors, turn on windshield wipers. This scam was rampant in L.A. in the 1980s.

The states attorney for Maryland in Baltimore lost her re-election bid because she refused to prosecute kids running a racket on the busiest streets.

A guy did exactly what you said, and they snapped his wipers off his truck. He parked highly upset, and stepped out with a bat to confront the kids. One of them pulled out a handgun and shot the dude down right in rush hour traffic.

She lost her job, and the city started enforcing a no squeege ban.

I can’t imagine being willing to die for my windshield wipers. Go home, call your insurance company, and avoid that area in the future.

This reminds me of Brazilian banks which have introduced "Street Mode" to secure your banking app while out of the home:

https://www.riotimesonline.com/brazil-news/brazil/nubank-wil...

"Brazilianization" is a real phenomenon, isn't it? One wishes we weren't going that way in the West, but we are.

Maybe it is a bit too much, but in general, Western societies should work on educating people to greatly reduce their amount of trust in other people. Current Western trust levels are simply not reflective of reality: they were meant for a white society with a single, enforced religion, where everyone was shaking in fear of divine punishment. We live in a global world now and vast majority of it never had or expected a similar level of trust, they are taking advantage of you way too easily. Including billion strong nations that had no concept of God for millennia and no concept of conscience.

Reducing trust is better in some respects, but deeply harmful in others. What would be great instead is to increase accountability so that it's safer to trust. In the case of scam money transfers, a path to reversal would be a start.

Unfortunately, with the ridiculous level of trust people have in the West, that will be only a vehicle for more scams. Especially "path to reversal". Sure the world is overall low-trust and it creates a lot of friction. Only alternative to avoid the switch would be to never start globalisation.

The vast majority of commenters here vote to dismantle the methods of accountability. This proposition won’t happen as long as the PMC class remain insulated from rapidly rising crime.

I am not at all surprised that your name seems to be Russian. Before anyone accuses me of racism, I too am from the same region, and my mother is ethnically Russian.

Your mentality is typical of people from low-trust societies - "lol those naive Westerners" (lokhi[0] in Russian). But while individuals in high-trust societies can indeed be lokhi, everyone in a low-trust society is, collectively. They are giving up on the social development and institutions that only work well when trust in people you don't know is a societal value. They are defective at best, and nonexistent at worst, in a society where everyone treats each other with scepticism, disdain and distrust by default, until proven otherwise.

[0] https://russiapedia.rt.com/of-russian-origin/lokh/index.html (sorry for RT)

I am not at all trying to present it as a positive development. SURE, living in a high-trust society is a blessing. Both emotionally - it is nice being able to trust people and be trusted by default - but also economically, because it vastly reduces friction in doing business. In Russia yes, main consideration is building a set of conditions (frequently with external checks, escrows, etc) to make sure you won't be duped - that frequently takes more energy than it takes to actually get the job done. For this reason, i don't deal with any Russian speaking clients, for example, it's simply not worth it. I am all on the side of high-trust.

Thing is, it's not the case. The world outside of a narrow circle of rich, white, Protestant countries has never been like this, and those countries too, are losing it because of changing racial composition, and immigration from low-trust cultures. And in a global world, high-trust groups are simply being taken advantage of.

I'm not sure why you are being downvoted. In my city in the US, police have basically said outright they won't respond to a host of petty crime offenses unless there is a severe injury. I was in a blatant hit and run, and police told me they wouldn't respond unless there was an injury, and to just contact my insurance. The obvious morale hazard to this is that there is literally zero downside to running, which basically has resulted in a level of traffic lawlessness that was unheard of 15 years ago. Even with clear dashcam video cops will do nothing.

In India, apps like Google Pay (which runs on UPI platform) require you to first unlock the app using your screen lock method and then also require entry of a pin to confirm any kind of money transfer.

not only that, the pin entry page very clearly shows the recipient, the amount and the option to see technical info like refids. moreover the ui is exactly the same whichever app you use to initiate the payment (as opposed to the dumpster fire that is zelle). this has been the case since day 1 of upi.

Honestly the fact that some govt employee in india got so much right that all the sv startups could not is truly baffling.

I feel like there should be two levels of unlocked phones 1 which is full unlocked (access key apps, photos, settings, etc.) and like a guest mode (phone, web browser, weather app, calculator, etc)

Android has this, in the form of guest profiles. though i dont know about anyone who uses it this way and pixel for whatever reason disables it by default. some chinese oems have a good interface for this though

I learned recently you can do this with screen time on iOS.

A "time delay safe" function in the app could accomplish the same thing. I'd certainly want to take 30 minutes to think about it (or login and unlock large transfers 30 minutes ahead of time) if I was going to spend more than a couple hundred dollars.

Right now, muggers can't take $1000 out of my wallet because I don't have $1000 in my wallet. They cannot force me to use an ATM to empty my bank account because my ATM daily limits are set to $500/day.

But, in theory, they could empty it if I was on Cashapp.

Cashapp, like so many tech startups rushing to replace incumbent taxi and hotel and other services with phone apps, has missed Chesterton's fence on this state of affairs in its hurry to become the key part of "providing everyone with access to important financial services so they can fully participate in the economy."

>Right now, muggers can't take $1000 out of my wallet because I don't have $1000 in my wallet. They cannot force me to use an ATM to empty my bank account because my ATM daily limits are set to $500/day.

When I moved to california my debit card got skimmed at a Lucky grocery store. Ever since then I've made sure that my debit card, venmo, paypal, and all my other money accounts are linked to a checking account that only has $500 in it. If I need to transfer someone more than that I'll transfer money into that account from my real checking account.

It continually amazes how advanced yet also how backwards the US is.

Zelle has the same issue. Cannot unwind a fraudulent transaction.

So, just avoid CashApp and Zelle.

It's not that you can't unwind them, it's that you can't do so through normal channels. Complain to the Office of the Comptroller of Currency and it will get fixed. I'd still avoid those apps, but I don't want anyone who got scammed to read your comment and give up hope.

Didn't work for me.

> squeege kids

And another euphemism.

They’re literally groups of teenagers with squeegees. What do you think they should be called? Nephilim?

CashApp -> Settings -> Privacy & Security. Top option is to turn on PIN or biometrics to open the app, or to move money. This has been there for many, many years.

This is the 12th reply to your post and first one to point this out. I think this report is trying to ride well-off people's lack of awareness of CashApp. Kinda what they're accusing Block of doing, which is funny.

Been seeing some tiktoks on this exact scam being run in bars, too - a man/lady will chat the victim up, ask for their phone to put in their number, and then go to cashapp and send themselves money, and disappear into the night. And yes, no recourse for the victim at all.

How does this end if you don't have CashApp installed?

On the one hand it's obvious that the Hindenburg people are right on this when they say that Block's app is used for criminal activities and money laundering. On the other hand that's what we get for trying to push cash itself more and more outside the boundaries of modern society. That video in a way made me root for the bad guys, a no-cash society where petty crime doesn't happen because the powers that be control it all is a not a society I personally want to be part of.

And then there is also the racial-related aspect of it all, not sure the Hindenburg analysts were aware of it. As in there is no white rapper in that video of theirs.

What racial aspect? Please explain

I've explicitly mentioned that these analysts used only black people as the "criminals" in their example video. Interesting that it flew right past them.

> these analysts used only black people as the "criminals" in their example video

Block targets Black Americans. This is like complaining about a gardening company’s analysts only talking about gardeners.

> Block targets Black Americans

Even worse. So one of the companies that tries to address/serve the black demographic is being put down but what I assume are not black financial analysts.

Like I've said, this Hindenburg company seems to not be aware of the whole societal background.

> one of the companies that tries to address/serve the black demographic is being put down but what I assume are not black financial analysts

This sounds like Adani’s defenders getting mad about Hindenburg not being Indian. Fraud is fraud. Their specialty is fraud. Why is fraud okay or not depending on who’s committing it?

Are there any white rappers name-dropping Cashapp in a similar context? That seems like the obvious case you would need to address before making this point.

in USA politics, this approach to outrage among literate people is related to "Willy Horton" ads, which portray an obviously stereotypical, middle-aged black man with a long history of crime, being released into society and then in the same breath blaming the authorities politically. This famously backfired.

The intended outrage here is "ghetto males" doing illegal things with money, using the cell phone, and bragging about it. The parent post here points to major just-under-the-surface problems with this kind of personal, borderline racist attack at the societal scale. Definitely concur here that a perfectly-enforced police state is not desirable, mostly because it is not possible, and the more force that is used in the remaining edge cases, makes things much worse overall, at too high a cost.

This coming just mere weeks away after people on this forum (and some of the people running the forum itself, like the CEO of YCombinator) were supporting (and more) much more bigger fraudsters compared to the rap lyricists presented here as examples of financial fraud, I'm talking about the VC industry in connection with the SVB case.

On a more general note I'm also curious about what you mention at the end of your comment, i.e. those higher societal costs are keep piling up, I'm wondering where is it all going to end.

Are there more artists name checking Cash App that they missed?

yes https://www.google.com/search?q=site:genius.com+cash+app

> As in there is no white rapper in that video of theirs.

Indeed, white rap artists are very underrepresented in mainstream popular music. There is a case for it being discrimination based on skin colour.

I have to say, this feels more like a clueless white rich guy trying to seem cool by mentioning hip hop songs he never actually listened to (or understood if he did hear them), that one of his underlings told him about, rather than evidence of "fraud".

Oh, you're not taking these depictions of drug payments and assassination payments literally are you? This is all artistic display for a persona and a set of practices that only exists as a performance.

</s>

I found this to be one of the weaker points in the research, as far as making a short case goes. If anything, the fact that it's so popular in hip hop would expose it to a much larger legitimate audience. Regardless, it's also just somewhat non-unique, Zelle is also name dropped in 22gz's Suburban, and a few Von and Durk songs, limiting ourselves only to drill rappers. Probably Venmo as well though I can't say I've heard it any songs.

The fraudulent activity is obviously a problem, but I'm not sure how to separate this association from, say, bragging about buying Gucci with drug money, street racing in a Dodge Hellcat, or performing drive-bys in a Revel.

If CashApp numbers are inflated by illegal activities that will go away if the law cracks down on them, that is a matter of concern for CashApp investors.

> illegal activities that will go away if the law cracks down on them, that is a matter of concern for CashApp investors.

And indeed for any luxury brand that exists. I still don't understand how that makes the app itself a fraud.

The report reads like someone who doesn't seem to like the target demographic associated with CashApp and the type of music listed...

It reads like people who understand that under US law Block were expected to actively search for and fight criminal activity on their platform. If a rapper raps about their fav sports car then whatever, car companies aren't expected to stop criminals from driving. If they rap about paying for murders through your app, that's actually a serious legal problem for the company providing the service.

If your money app allows you to be scammed with no recourse to pull back the funds, then as a customer in a free market where better fraud protections exist, you are going to consider that app to be scammy.

This is marketing not moral reasoning, and as customers, please encourage other customers to have a low tolerance for being blamed for fraud.

Funny, it seemed like one of the strongest points.

1. It's visual and memorable.

2. It leaves you wondering what the hell Dorsey and "Cash App Studios" were thinking when they promoted these guys.

3. It strongly bolsters their case that Block were asleep at the wheel with respect to criminal activity, probably intentionally.

We all know that Silicon Valley firms are obsessed with not being racist but didn't anyone there wonder what the guys were rapping about for even a second? Or why they'd name an entire song after the app? That isn't in any way normal behavior for rappers. Surely someone watched it and realized that, um, this isn't actually good PR, these guys are saying they use Cash App to pay for all sorts of criminal activity. Why? If it's once to make a rhyme then it's an artistic choice, if it's >1000 times that can't be a coincidence.

To be so blind to activity so obvious that you're literally boasting about it on stage in front of a bunch of bankers implies a massive breakdown of AML obligations. And that would indeed be short-worthy.

I'm not sure they really bent over backwards to not be racist considering that of all the possible representations of their customers' use cases, they went with "use our app to move your drug money"

These report put together all possible allegations and the kitchen sink. It was same for Adani reports. Hindenburg isn't a legal authority which is seeking to prosecute companies. They are activist investors. So for them it make sense to add emotional arguments, aggregate already public information and present all data/scenarios that will cause the stock to fall.

I saw a car in a parking garage last week with writing on the back window in soap:

  JUST MARRIED
  SEND US SOME LOVE
  CASHAPP: xxxxxxxxx

That mix is fire.

Yes. No rapper cares about the UI/UX… Is subtext of songs lost on people?

I hadn't had a credit card swiped in years, but it happened to me a month or two ago.

Whoever had my card used it for CashApp transactions (I didn't even know this was possible?), ultimately creating ~15 transactions of varying sizes, all less than $100. It took a while to unwind, and in the end my case was actually denied (!) for 1 of them.

I bet I counted as a new user, with $100+ in transaction volume. :)

Just because of this interaction, my disposition towards Cash App has tilted into the negative, and I literally didn't have an opinion on it before. Regardless of any number-juicing they may have indulged in, their fraud-detection tech has to be better, it's not doing them any long-term favors.

> One former customer service employee estimated that 60%-70% of the accounts they reviewed during a typical shift would have more than a dozen linked accounts. Another two former employees estimated 40% and 75%, respectively.

I don't think this necessarily means that 40%-75% of the accounts on Block's books were fake (as I took it to first mean from the summary). Could it just mean that the accounts that were set up for review based on high risk activity were predominantly fraudulent (as they should be)?

Skimmed through the report, and all of the allegations will at most amount to a token fine. There's nothing fundamentally wrong with the company. Every bank and money transfer app out there facilitates criminals in some way. Every tech (especially fintech) company is overvalued.

The market is overreacting because of Hindenburg’s past successes, but the stock price has already recovered by 10+ points since this morning and is rising. I predict all of it will amount to nothing in the end.

When IBM was hit by anti trust and entered a consent degree or when Microsoft got hit for its Explorer bundling practices it spelled the end of growth. This is not only a question of fraud and size of fines. The real question is are the current multiples in its stock valuation justified?

Do you think the government is going to overhaul the banking industry and the KYC system based on this report?

> “I Paid Them Hitters Through Cash App”: Block Paid To Promote A Video For A Song Called “Cash App”, Which Described Paying Contract Killers Through The App.

> The Artist, “22Gz”, Was Later Arrested for Attempted Murder

It astonishes me how many rappers do this. It’s one thing to be a criminal, and it’s another to rap about your crimes and do the job of the investigators…they probably think it makes them tough or something.

I believe it is part of their marketing strategy -- being seen as a "cold blooded murderer" may add to the "cool factor" of the artist, which may appeal to the fans, even when it's artificially cultivated.

Ja Morant is currently throwing his life away because of the enormous pressure to do this. He’s from a nice family and is definitely no gangster.

They're just keepin' it real.

I didn't know Square had changed their name to Block. Looks like it happened in December 2021: https://investors.block.xyz/news/news-details/2021/Square-In...

That said this really seems overblown. The report seems to mostly just talk about Cash App. Square Payments, Weebly and TIDAL are not even mentioned. Afterpay is mentioned but that was a 2022 acquisition so the problems likely predate Block's involvement.

It feels weird that they're using Cash App to indict the company as a whole. A single product in their portfolio doesn't justify calling the whole company a fraud.

> Cash App, which analysts have said is the most important driver of the stock, has demonstrated signs of stagnation with slowing inflows and account growth.

> It feels weird that they're using Cash App to indict the company as a whole.

they profit off shorting. So it makes sense to target them if the company has _some_ issues with fraud, even if it's a small part of their business, as it hasn't been priced in yet before this news breaks and people are positive about the company.

They aren't doing a public service or anything. It's a reason why companies like credit suisse don't get targeted by hindenburg, because the market has almost priced in all of the fraud, and the shorting opportunities arent really there.

It just ruins their reputation as a reliable short-seller. It's short-sighted. They had good reports until now.

How does it ruin their reputation as short sellers?

By targeting a SV darling like Dorsey?

Putting out a low-quality report?

How is it low quality?

> a low-quality report

Block’s main product not only overstating its numbers but also wilfully facilitating money laundering and fraud could be a company-ending problem.

Credit Suisse was massively shorted, no idea if Hindenburg did as well.

If the app is the primary business driving profitability growth you can use it to indict the company. The stock price isn't based on non-performing parts of the business.

What feels weird that the top comment is by someone who didn’t even know the company changed its name 2 years ago.

Can we do better? HN could be so much better.

HN ranks newer comments near the top for a few minutes so everyone gets a chance at visibility. So don't worry, in a few minutes I'm sure my amateur take will sink down to its rightful place.

Make clear suggestions, or just do better yourself.

> It feels weird that they're using Cash App to indict the company as a whole.

Cash App is 60% of their revenue.

Their "revenue" is also trading bitcoins, where people buy/sell bitcoins on their platform and is booked as $28k revenue (current price) where they only ever stand to profit like $10 off that.

The vast share price growth since the rebrand and Cash App launch seems like a legitimate target if the app is in fact bullshit.

They're not saying the company is worthless, they're saying it's overvalued currently because most of its current share price is a result specifically of Cash App.

Their proposed actual valuation is quite a long way from zero and entirely consistent with them thinking the other products are at least somewhat solid.

(the title on here could probably do with editing, but that's a separate matter)

> The vast share price growth since the rebrand

Uh, the price at rebrand was 194.50. The price at close yesterday was 77.46. That's a 60% loss, not "vast share price growth".

Some parts are overblown, financial blacklisting sex workers is a waste of everyone’s time and resources. Conflating all sex work with sex trafficking is … consistent, but useless and inaccurate.

Flouting FinCEN and other US agency regulations would be a valuable problem

Many of FinCEN’s regulations are stupid and investors bidding up shares on user metrics is also dumb, but if any investor purchased based on poor metrics then that will be an expensive problem

the regulatory slaps will be expensive either way

The interchange issue is hard to tell about its value, but looking at Paypal’s issue with the SEC can provide clues

Is Hindenburg double dipping on whistleblower reports to the SEC?

How are you confident in your opinion without even knowing the name had changed a couple of years ago?

The pre market is looking brutal: https://www.marketwatch.com/investing/stock/sq

Those puts are going to pay off handsomely.

Looks like it's an easy way to make money, SEC won't do nothing of course.

What role would the SEC have? First amendment demands the freedom to publish whatever truthful information you want and there’s no restriction on profiting from “outside” information.

If allegations in the report are false, the traders face legal liability. If they’re true but the market disagrees with the impact, they’ll lose money on the trades.

What specific thing should the SEC be policing here?

Don't see any specific allegations, just a lot of rap song quotations and random opinions, all emotionally charged. That smells bad, just as that decade long Tether FUD that went nowhere. Anyway, just gonna buy the stock for a quick buck)

I agree that the report is low quality, but if Block has issue with the truthfulness they can sue the short seller.

Short selling is absolutely legal. Course manipulation and insider trading are not. I guess you see the tight rope short sellers like Hindenburg are walking on, right?

Also, if markets don't move following such a report short sellers stand loosing a ton of money, even if they are right.

Among other companies brought down, rightly so, is Wirecard. And they played the "mean, evil short sellers try to manipulate the share price"-card hard. So, shoet sellers do have a place in our modern financial system.

>> Cash App’s frictionless approach lets users join with just an email or a phone number.

I don't know, I've been asked to send a selfie and a driver license, and activate the physical card they sent in the mail to my registered address - all the usual KYC procedures.

They also did send a 1099 form for all Bitcoins I deposited to the app in 2022.

I believe their UX is similar to PayPal or Stripe where anyone can “join” - but performing money transfers triggers the actual KYC “additional verification.”

so, you can't get a physical credit card in the mail in the name of Donald Trump, like the picture in the report?

seems pretty bad if true. gotta wonder if Block was really that lax that anyone could do that, or if the authors found an exploit and gamed the system, and if the vulnerabilities have been fixed.

Chesterton's Fence strikes again - every so often, someone has the bright idea of uninventing all the rules for just long enough that all of the reasons the rules were invented in the first place can regress back into existence.

I sometimes think that the absence of experience is an issue.

Many of these Jurassic-scale disasters are ones that make me wonder "Were there any adults in the room, when this decision was made?"

I suspect the answer is frequently "No."

They don't call it "the nanny state" for nothing.

Why would these companies care if their nonsense makes other people suffer when they still profit from that suffering?

Ding ding ding. It sounds like everyone knew the grift, but didn’t care because they got paid.

Meanwhile they’re profiting off some 13 year old getting raped in a Motel 6.

Not that great!

The crypto sector explained in a short sentence..

If I had a penny whenever someone incorrectly referenced that principle in response to a libertarian's desire to eliminate or disregard regulations. Naturally, they understand the reasons for the regulations' existence, they just hold a different viewpoint.

The corpus of libertarian writing in social media about crypto and banking regulations and fractional reserve banking and FDIC would tend to disprove your statement about libertarian beliefs.

No doubt in some academic tower of excellence, the arguments are tightly wound and full of data, but it isn’t propagating to the common discourse.

I meant to reference Block CEO Jack Dorsey in my comment. I'm pretty sure he knows the intended objectives behind AML regulations and so on. I doubt that he would go "oh! I didn't think about this" if someone were to explain their purpose to him. Plus, in case that was your point, Chesterton's Fence is about a lack of reasoning about the purpose of the rules, not a bad reasoning.

At the Dorsey level, the "rule" could be something entirely different. The existing industry rule could be that human review is necessary to comply with AML laws. Dorsey thinks technology can take care of it while cutting costs, totally unaware of the decades and decades where existing money transfer businesses experimented with it, and saw how it didn't work.

I had never heard of cash app (probably because I'm not underbanked) until my mother in law fell for some phishing scam and the scammer was trying to get her to send money through cash app.

Nah. You’re underbanked in a different way.

Come again?

Wait until they hear what rappers say about gold or cash...

Wow...

> “Every Criminal Has A Square Cash App Account” – Former Employee

> The Signs Are Hard To Miss: There Is Even A Gang Named After Cash App, With Members Arrested For Fentanyl Distribution

> Our research shows that Block has embraced a traditionally very underbanked segment of the population: criminals.

> Many of These Songs Describe The Role of Cash App in Facilitating Criminal Activity, Including Murder-For-Hire

> Cash App Was Cited As “By Far” The Top App Used in Reported U.S. Sex Trafficking, According to A Leading Non-Profit Organization

> Department of Justice Complaints Outline How Cash App Has Been Used To Pay For Sex Trafficking, Including Sex Trafficking Of Minors

It's essentially a bank without capital requirements and that does not do KYC checks.

What could possibly go wrong with that?

Why did paypal stock have to drop because of this...

Probably just because they offer similar services, so a bit of contagion.

PayPal has not dropped it is still at 72.7 relative to yesterday close at 74.34

I thought it was a known fact that CashApp had minimal KYC verification (and subsequent massive problems of fraud)

Block stock price down 20% at market open...Hindenburg have generated a significant return already.

Given how effective this appears to be for moving the market, I'm surprised how much fluff and insubstantial evidence is present in this post. For example, the important charge that the company has supported criminal activity. An assertion is made that the company turns a blind eye to obvious criminal activity, but no hard evidence is provided. Instead it spends time on the fact that a rapper was paid to promote the service who was later arrested. We don't even get any numbers to show the rate of criminal activity that is conducted with Cash App vs Venmo, Paypal, wires, crypto, or cash.

> CEO Jack Dorsey has publicly touted how Cash App is mentioned in hundreds of hip hop songs as evidence of its mainstream appeal. A review of those songs show that the artists are not generally rapping about Cash App’s smooth user interface—many describe using it to scam, traffic drugs or even pay for murder. [See our compilation video on this here][0]

[0] https://www.youtube.com/watch?v=StjWk3Mj-M4

"Block’s $29 billion deal to acquire ‘buy now pay later’ (BNPL) service Afterpay closed in January 2022. "

Oh man, big impairment charges coming... $29B.

I got rid of cash app after there was a fraudulent $20 charge against my account and their customer service did absolutely nothing about it.

Weird, I use cashapp as my daily debit card. Figure it reduces overall risk by only having a set amount available for use at any time.

If I need to spend more? I move it to cash app, then spend it.

My main checking and savings accounts do not even have cards that are active. Its all cash app all the time.

Not saying they aren't doing anything wrong, just that there are plenty of legitimate uses for the service.

I don't believe Hindenburg is claiming that 100% of all uses of Block is fraudulent. For any service, something between 0 and 100% of use case generally is fraud; their claim is that the actual percentage is much higher than what the public knows, and thus the market is overvaluing Block.

Is there an easy way to get exposure to Hindenburg's reports/bets, like some kind of fund that shorts the stocks they report on? Would love to get in on the action, but I'm afraid to open a brokerage account to short stocks and then make a tiny mistake and be out like a hundred grand!

"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, "

Isn't that the whole point of 'disruptive innovation'?

Isn’t this pretty bad for the Block, Inc leadership. KYC and money laundering laws are one of the few corporate laws that can result in doing actual jail time.

In addition, politics being what it is, with the SVB “bailout” the Biden administration will be looking for something to show that they are not coddling Silicon Valley. Throwing a few execs in jail would send the message.

There is no will in the government to enforce that stuff anymore

The real reason is here: https://www.opensecrets.org/orgs/block-inc/summary?id=D00007...

Why would you fuck with the DNC’s golden goose?

Misleading headline - the article doesn't actually call Block Inc a fraud.

It just claims that Block Inc are overvalued, that their metrics are misleading, and that their platform is facilitating fraud.

Did Hindenburg ever reported Fraud and Scandals by Credit Suisse?

No idea what Hindenburg did, but Credit Suisse was massively shorted for quite a while now. I just didn't make HN front page or garner enough media attention prior to the SVB debacle.

Your shorts will only print when nobody else sees it coming.

If you follow activist short seller community, credit suisse is basically a running joke. The problem is it's easy to burn if you short it and it gets some magic bailout or something because it's too big to fail. Like with Tesla's business model, the market can stay irrational longer than you can stay solvent.

Wow, another example of a Jack Dorsey company being just great for our world. When are people going to realize that this guy is a total shithead?

Pretty much all fintech innovation is avoiding kyc, fraud, and hiding fees and leverage behind "complexity"(not actually).

A typical "successful" startup. Move fast and break things. Disrupt. Be bold.

Down 16% pre-market @ 9:12am est

“I paid them hitters through Cash App”— Block paid to promote a video for a song called “Cash App” which described paying contract killers through the app. The song’s artist was later arrested for attempted murder.

for context: I'm seeing 200k position against SQ using puts, strike price 50

Current stock price: ~ 65

Did anyone read the report? The summary is quite short. Seems like a nothing-burger.

It reads a lot like what Wells Fargo did, re opening accounts, only targeting the criminal demographic.

Wells Fargo took advantage of black people and minorities, I wouldn't call them the criminal demographic. They were also the victims.

hef19898 wasn't saying Wells Fargo targeted the criminal demographic, they're saying Block did.

What Wells Fargo did was despicable. What Block did, and I should have been a lot more concise, is similar in opening up multiple, and sometimes fake, accounts for show growth measured in number of accounts instead of actual deposits or clients. In that regard there are similarities. Wells Fargo targeted minorities, Block targeted criminals and fraudsters. This of course doesn't mean the people Wells targeted are criminals, as you said they were victims of Wells business practices.

read the report then

I hope this is the last straw to end Jack Dorsey‘s career.

Lol OK..

Nathan Anderson is the founder of Hindenburg Research, a New York-based investment management firm, and a forensic financial investigator that is famous for releasing reports on alleged wrongdoing by companies. When publishing some of these reports, his company profits by short selling the target company's stocks (that is, by making a bet in securities markets that the price of the company's shares will decline). If all goes according to plan, the report itself will cause the price of the stock to decline, leaving Hindenburg Research with a profit from its short position.

Why are you quoting the disclaimer as if its secret, or some kind of gotcha? Yes this is a short selling firm. While they have some incentives to exaggerate, they are trying to find and expose genuine fraud because that is what will actually affect the share price. Hindenburg's record is quite good, and many of their reports have led to followup government enforcement actions.

Not being a secret doesn't mean people knows about them. I bet most people over here have no idea they are short sellers. I didn't know and I read a lot of news. You said it yourself, they have incentive to exaggerate (I would say a huge incentive), so people should read these reports knowing this little fact. Don't you think?

Well, their name is "Hindenburg", the most famous crash in history after the Titanic.

The first time I heard their name I guessed they were short sellers, and two minutes on their site confirmed it.

Fact. But you left out the part where it turns out they've been right about their exposes.

Its like with Private Equity. A part of me hates the concept and much of what's out there, but when done correctly it brings efficiency to the market.

Basically, short-sellers, PE, etc. are all just more ways of monetizing investigative journalism. They're like a 'virus' for capitalism, forcing good behavior and punishing the bad.

That's ... exactly how short selling reports work?

There's an explicit disclosure in the piece that they've taken a short position, but really, when a short seller puts out a report like this, you can safely assume that's the case even without reading far enough through to get to the explicit disclosure.

If they're right, they make money. That's what makes it worth investigating to see which companies are screwed up.

I think I understad how short sellers operate. But thanks for the information.

Reply on news.ycombinator.com