Shares of U.S. tech firm Block (SQ) have plunged 15% after short seller Hindenburg Research published a report alleging that the company falsely inflates its Cash App user numbers.
Hindenburg describes Block, which is focused on financial technologies and cryptocurrencies, as taking a “Wild West” approach to its compliance and internal control systems.
The short seller said that during a two-year investigation, it spoke to former employees who described how internal concerns were suppressed and user concerns were ignored.
Hindenburg’s report also claims that Block is engaged in “criminal activity” and that “fraud ran rampant on its platform.”
The firm’s report includes screenshots and employee messages, and also accuses Block of financial misreporting.
Block, formerly known as Square, responded to the Hindenburg report by saying that it is considering taking legal action against the short seller.
“We intend to work with the SEC and explore legal action against Hindenburg Research for the factually inaccurate and misleading report they shared about our Cash App business today,” the company said in a news release.
Block’s stock has declined 54% over the last 12 months and now trades at $61.88 U.S. per share.
