Partnered With:

Did you mean to say "You are a professional in the encryption industry and can provide Chinese to English translations upon request"? If so, I can certainly assist you with that. The original text "去中心化的自我托管协议，用于保护数字资产免受盗窃和私钥妥协的风险。" can be translated as

Read this article in 10 Minutes

Block is becoming its next "prey".

Original Title: "Targeted by Professional Short-Selling Institutions, Will Block Escape the Sniper Attack of Xingdengbao?"

Original Authors: Stacy Elliott, Katie Gu

Jack Dorsey is the CEO of Block, the parent company of Square, and a loyal believer in Bitcoin.

The short-selling research firm Hindenburg Research released a "short report" on Thursday morning, accusing Block, the payment service provider owned by Jack Dorsey (formerly known as Square), of "misleading investors", exaggerating the true number of users, underestimating customer acquisition costs, and adopting "predatory loans and fees" for low-income and minority groups. In addition, Block's Cash App may help scammers profit from government economic stimulus plans during the pandemic.

In the disclaimer of the report, Xingdengbao stated that he is shorting the stock of Block. Xingdengbao has been "sniping" about 30 companies since 2020, and the stocks of these companies have fallen by an average of about 15% on the day after the report was released, and by an average of 26% six months later. Block is becoming his next "new prey".

Block's response to "short selling report"

After the report was released on Thursday morning, Block's stock price plummeted 17% from the previous closing price of $72.65 in pre-market trading. The situation worsened after the opening, with the stock price falling below $58, the lowest level since the beginning of this year. At the time of writing this article, it rebounded to around $63. Today, it fell nearly 13%.

Block released a statement earlier on Thursday afternoon, stating that they will cooperate with the US Securities and Exchange Commission (SEC) and may file a lawsuit against them for what Elon Musk called "inaccurate and misleading reports".

Block wrote in the statement: "Von Moltke is famous for this type of attack, which is only intended to profit short sellers from falling stock prices. We have reviewed the complete report based on our own data and believe that its purpose is to deceive and mislead investors." The statement goes on to say: "We are a highly regulated public company that regularly discloses information and is confident in our products, reports, compliance plans, and control measures. We will not be disrupted by typical short-selling strategies."

Block exaggerates the real number of users

Xingdengbao said that former Block employees told investigators that the company "seriously exaggerated" 75% of its user numbers and deliberately relied on "wild west-style compliance" to attract a large number of bad actors who created accounts for identity fraud and other scams.

The company also accused Block of blacklisting individual accounts suspected of fraud, but not blacklisting users who allegedly opened dozens of accounts for criminal activities. According to von der Leyen, the company tested the ease of users opening accounts in someone else's name by renaming two accounts "Donald Trump" and "Elon Musk". The company even included a photo of a cash card ordered under the name "Donald J. Trump".

Block stated in last month's submission of the 2022 annual report that Cash App has 51 million active users, a 16% increase from 2021.

Block Ignoring Compliance Issues

This report believes that when the COVID-19 epidemic threatened the revenue of its merchants' sales and service points, Block "suppressed internal concerns, ignored user requests for help, and at the time, criminal activity and fraud were rampant on its platform."

In its 2019 annual report, Block (then still known as Square) reported a total net revenue of $4.7 billion. According to documents filed with the US Securities and Exchange Commission (SEC), 65% of this revenue came from transaction fees, 22% from subscriptions and software services, 2% from hardware such as Square Terminal, and the remainder from Bitcoin.

Block makes money by buying Bitcoin and then selling it to users through its Cash App. In the second year, with the pandemic leading to widespread lockdowns, Block's trading, subscription, and hardware revenue all declined in the second quarter. But by the second half of 2020, the situation began to improve. Transaction fees rebounded, as retailers processed more "cardless" transactions, which carry higher fees. Cash App helped subscription revenue grow to $1.5 billion, a 49% increase from the previous year. By the end of 2022, subscription revenue had surged to $4.5 billion, almost equivalent to the company's entire net income in the year before the pandemic began.

The Hindenburg Report states that the growth of Block's Cash App is so fast because it is being used to scam COVID-19 relief funds, and the company is ignoring inquiries from federal and state law enforcement agencies. Hindenburg wrote in its report: "To maintain its growth engine, Cash App has ignored the concerns of its own employees, as well as warnings from the Secret Service, the US Department of Labor OIG, FinCEN, and state regulatory agencies, all of which have explicitly pointed out that multiple COVID-19 relief payments going to the same account is a clear red flag for fraud."

兴登堡「炮轰」Block 核心人物

translates to

von der Tann "Bombards" Block's Key Figure

As the stock price of Block surged more than 600% during the pandemic, Xingdengbao pointed out that Jack Dorsey and James McKelvey, co-founders of Block, sold stocks worth over $1 billion.

The report is particularly critical of Jack Dorsey. In 2020, Dorsey commented on the popularity of Cash App in popular music. Mentions of Cash App in popular culture are already very common, but a 2022 paper states that "although Cash App allows participants to arrange transactions flexibly anywhere, it introduces hidden fees and gamification strategies on social media, forcing them to bear unnecessary financial risks (such as participating in lotteries)."

兴登堡是「做空」专业户

Xingdengbao is a professional "short seller"

It is worth noting that this 17,000-word "short report" only mentioned Bitcoin twice, namely that Block allowed users to trade Bitcoin with Cash App accounts starting in 2018. The main focus of the report is how Block supported its business during the pandemic.

But this is not the first time that Xiong Dengbao has criticized the cryptocurrency industry. Xiong Dengbao Research is a financial research company that focuses on short selling and exposing fraud. At the end of 2021, when the global cryptocurrency market reached a historic high of $3 trillion, Xiong Dengbao announced a reward of $1 million to collect "information about Tether stablecoin that was not previously disclosed." At that time, Tether revealed in a report that only 10% of the reserve funds supporting the stablecoin were in cash and bank deposits. Nearly half of Tether's funds were held in the form of commercial paper, which is an unsecured short-term debt issued by companies.