• Block Inc., formerly known as Square Inc., is a $44 billion market cap company that claims to have developed a “frictionless” and “magical” financial technology with a mission to empower the “unbanked” and the “underbanked”.
• Our 2-year investigation has concluded that Block has systematically taken advantage of the demographics it claims to be helping. 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, dress up predatory loans and fees as revolutionary technology, and mislead investors with inflated metrics.
• Our research involved dozens of interviews with former employees, partners, and industry experts, extensive review of regulatory and litigation records, and FOIA and public records requests.
• Most analysts are excited about the post-pandemic surge of Block’s Cash App platform, with expectations that its 51 million monthly transacting active users and low customer acquisition costs will drive high margin growth and serve as a future platform to offer new products.
• Our research indicates, however, that Block has wildly overstated its genuine user counts and has understated its customer acquisition costs. Former employees estimated that 40%-75% of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual.
• Core to the issue is that Block has embraced one traditionally very “underbanked” segment of the population: criminals. The company’s “Wild West” approach to compliance made it easy for bad actors to mass-create accounts for identity fraud and other scams, then extract stolen funds quickly.
• Even when users were caught engaging in fraud or other prohibited activity, Block blacklisted the account without banning the user. A former customer service rep shared screenshots showing how blacklisted accounts were regularly associated with dozens or hundreds of other active accounts suspected of fraud. This phenomenon of allowing blacklisted users was so common that rappers bragged about it in hip hop songs.
• Block obfuscates how many individuals are on the Cash App platform by reporting misleading “transacting active” metrics filled with fake and duplicate accounts. Block can and should clarify to investors an estimate on how many unique people actually use Cash App.
• 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]
• “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.
• Cash App was also cited “by far” as the top app used in reported U.S. sex trafficking, according to a leading non-profit organization. Multiple Department of Justice complaints outline how Cash App has been used to facilitate sex trafficking, including sex trafficking of minors.
• There is even a gang named after Cash App: In 2021, Baltimore authorities charged members of the “Cash App” gang with distribution of fentanyl in a West Baltimore neighborhood, according to news reports and criminal records.
• Beyond facilitating payments for criminal activity, the platform has been overrun with scam accounts and fake users, according to numerous interviews with former employees.
• Examples of obvious distortions abound: “Jack Dorsey” has multiple fake accounts, including some that appear aimed at scamming Cash App users.  “Elon Musk” and “Donald Trump” have dozens.
• To test this, we turned our accounts into “Donald Trump” and “Elon Musk” and were easily able to send and receive money. We ordered a Cash Card under our obviously fake Donald Trump account, checking to see if Cash App’s compliance would take issue—the card promptly arrived in the mail.
• Former employees described how Cash App suppressed internal concerns and ignored user pleas for help as criminal activity and fraud ran rampant on its platform. This appeared to be an effort to grow Cash App’s user base by strategically disregarding Anti Money Laundering (AML) rules.
• The COVID-19 pandemic and nationwide lockdowns posed an existential threat to Block’s key driver of gross profit at the time, merchant services.
• In this environment, amid Cash App’s anti-compliance free-for-all, the app facilitated a massive wave of government COVID-relief payments. CEO Jack Dorsey Tweeted that users could get government payments through Cash App “immediately” with “no bank account needed” due to its frictionless technology.
• Within weeks of Cash App accounts receiving their first government payments, states were seeking to claw back suspected fraudulent payments—Washington State wanted more than $200 million back from payment processors while Arizona sought to recover $500 million, former employees told us.
• Once again, the signs were hard to miss. Rapper “Nuke Bizzle”, made a popular music video about committing COVID fraud. Several weeks later, he was arrested and eventually convicted for committing COVID fraud. The only payment provider mentioned in the indictment was Cash App, which was used to facilitate the fraudulent payments.
• We filed public records requests to learn more about Block’s role in facilitating pandemic relief fraud and received answers from several states.
• Massachusetts sought to claw back over 69,000 unemployment payments from Cash App accounts just four months into the pandemic. Suspect transactions at Cash App’s partner bank were disproportionate, exceeding major banks like JP Morgan and Wells Fargo, despite the latter banks having 4x-5x as many deposit accounts.
• In Ohio, Cash App’s partner bank had 8x the suspect pandemic-related unemployment payments as the bank that processed the most unemployment claims in the state, even though the latter bank processed 2x the claims as Cash App’s, according to data we obtained via a public records request.
• The data shows that compared to its Ohio competitor, Cash App’s partner bank had nearly 10x the number of applicants who applied for benefits through a bank account used by another claimant – a clear red flag of fraud.
• Block had obvious compliance lapses that made fraud easy, such as permitting single accounts to receive unemployment payments on behalf of multiple individuals from various states and ineffective address verification.
• In an apparent effort to preserve its growth engine, Cash App ignored internal employee concerns, along with warnings from the Secret Service, the U.S. Department of Labor OIG, FinCEN, and State Regulators which all specifically flagged the issue of multiple COVID relief payments going to the same account as an obvious sign of fraud.
• Block reported a pandemic surge in user counts and revenue, ignoring the contribution of widespread fraudulent accounts and payments. The new business provided a sharp one-time increase to Block’s stock, which rose 639% in 18 months during the pandemic.
• As Block’s stock soared on the back of its facilitation of fraud, co-founders Jack Dorsey and James McKelvey collectively sold over $1 billion of stock during the pandemic. Other executives, including CFO Amrita Ahuja and the lead manager for Cash App Brian Grassadonia, also dumped millions of dollars in stock.
• With its influx of pandemic Cash App users, our research shows Block has quietly fueled its profitability by avoiding a key banking regulation meant to protect merchants. “Interchange fees” are fees charged to merchants for accepting use of various payment cards.
• Congress passed a law that legally caps “interchange fees” charged by large banks that have over $10 billion in assets. Despite having $31 billion in assets, Block avoids these regulations by routing payments through a small bank and gouging merchants with elevated fees.
• Block includes only a single vague reference in its filings acknowledging it earns revenue from “interchange fees”. It has never revealed the full economics of this category, yet roughly one-third of Cash App’s revenue came from this opaque source, according to a 2022 Credit Suisse research report.
• Competitor PayPal has disclosed it is under investigation by both the SEC and the CFPB over its similar use of a small bank to avoid “interchange fee” caps. A Freedom of Information Act (FOIA) request we filed with the SEC indicates that Block may be part of a similar investigation.
• Block’s $29 billion deal to acquire ‘buy now pay later’ (BNPL) service Afterpay closed in January 2022. Afterpay has been celebrated by Block as a major financial innovation, allowing users to buy things like a pair of shoes or a t-shirt and pay over time, only incurring massive fees if subsequent payments are late.
• Afterpay was designed in a way that avoided responsible lending rules in its native Australia, extending a form of credit to users without income verification or credit checks. The service doesn’t technically charge “interest”, but late fees can reach APR equivalents as high as 289%.
• The acquisition is flopping. In 2022, the year Afterpay was acquired, it lost $357 million, accelerating from 2021 losses of $184 million.
• Fitch Ratings reported that Afterpay delinquencies through March 2022 had more than doubled to 4.1%, from 1.7% in June 2021 (just prior to the announced acquisition). Total processing volume declined -4.8% from the previous year.
• Block regularly hypes other mundane or predatory sources of revenue as technological breakthroughs. Roughly 31% of Cash App’s revenue comes from “instant deposit” which Block says it pioneered and works as if by “magic”. Every other major competitor we checked provides a similar service at comparable or better rates.
• On a purely fundamental basis, even before factoring in the findings of our investigation, we see downside of between 65% to 75% in Block shares. Block reported a 1% year over year revenue decline and a GAAP loss of $540.7 million in 2022. Analysts have future expectations of GAAP unprofitability and the company has warned it may not be profitable.
• Despite this, Block is valued like a profitable growth company at (i) an EV/EBITDA multiple of 60x; (ii) a forward 2023 “adjusted” earnings multiple of 41x; and (iii) a price to tangible book ratio of 13.1x, all wildly out of line with fintech peers.
• Despite its current rich multiples, Block is also facing threats from key competitors like Zelle, Venmo/Paypal and fast-growing payment solutions from smartphone powerhouses like Apple and Google. Apple has grown Apple Pay activations from 20% in 2017 to over 70% in 2022 and now leads in digital wallet market share.
• In sum, we think Block has misled investors on key metrics, and embraced predatory offerings and compliance worst-practices in order to fuel growth and profit from facilitation of fraud against consumers and the government.
• We also believe Jack Dorsey has built an empire—and amassed a $5 billion personal fortune—professing to care deeply about the demographics he is taking advantage of. With Dorsey and top executives already having sold over $1 billion in equity on Block’s meteoric pandemic run higher, they have ensured they will be fine, regardless of the outcome for everyone else.

Initial Disclosure: After extensive research, we have taken a short position in shares of Block, Inc. (NYSE: SQ). This report represents our opinion, and we encourage every reader to do their own due diligence. Please see our full disclaimer at the bottom of the report. 

Background: Block’s Early Origins

Block, Inc. (SQ), founded by entrepreneur Jack Dorsey, is a Silicon Valley darling, offering payment and mobile banking services for merchants and consumers.

The company, then named Square, began operations in 2009 and emerged with a disruptive idea: a tiny card reader that could plug into a smartphone’s headphone jack to easily enable artists and vendors to take credit card payments.

From there, the company developed tablet-style point-of-sale systems, a market that grew immensely, resulting in strong competition including from companies like Toast and Clover. Once the point-of-sale market adapted to Block’s disruption, the company looked elsewhere to keep its growth story alive.

In 2013, a month following PayPal’s acquisition of Venmo, Block launched Square Cash, later rebranded Cash App. It aimed to compete with Venmo by providing financial services to consumers, starting with a peer-to-peer mobile app where users could send and receive money.

In 2014, following the surge of the peer to peer lending market, Block began offering short-term loans to its merchant base, with Block receiving a percentage of every transaction until the loans were repaid. [Pg. 5] [1,2,3]

In 2017, Block expanded toward more traditional banking by introducing the “Cash Card,” a prepaid debit card allowing users to transact outside of their virtual Cash App wallet. [Pg. 10] 

In 2018, following bitcoin’s spike in price and popularity, Cash App allowed users to move funds in their Cash App wallet into Bitcoin.

By 2019, following Robinhood’s surge in popularity, Block also began offering free stock trading. [Pg. 14]

Bull Case: Cash App’s Rapid Adoption Will Lead to Exponential, High-Margin Growth

Prior to 2020, the merchant services side of Block’s business drove the company’s profitability. As of the end of 2019, merchant services accounted for $1.39 billion in gross profit, compared to the consumer-facing Cash App, which accounted for only $457.6 million of gross profit.[1]

That changed during the pandemic, as many merchant businesses locked down and individuals activated millions of Cash App accounts to receive government stimulus and unemployment payments.

By the end of 2019, Cash App had 24 million monthly active users, according to the company’s Q4 letter to shareholders. [Pg. 2] By the end of 2020, Cash App reported 36 million monthly actives, which has since grown to 51 million. [Pg. 2]

The explosion of user growth resulted in higher gross profit. By the end of 2020, Cash App gross profit reached $1.2 billion, a 170% growth rate from the prior year, compared with merchant services gross profit of $1.5 billion, an 8% growth rate from the prior year.[2]

During the company’s Q3 earnings call in November 2021, Jack Dorsey explained how Cash App is an ideal platform to introduce new services to customers because of its low customer acquisition costs, owing to its viral appeal:

“So, we have these incredible viral loop and network effects in peer-to-peer, and now we get to look forward towards being more of a commerce front end.”  

In September 2022, Block CFO Amrita Ahuja cited the company’s purchase of buy-now-pay-later company Afterpay as an example of this strategy, saying it created “an incredible opportunity for us, particularly when you think about leveraging that capability across Cash App 80 million annual actives.”[3]

Investors are now betting that Cash App’s growing millions of users will create a ready market for Block’s future high-margin financial products.

“Block expects Cash App Commerce to be one of Cash App’s primary gross profit growth drivers in the coming years and is investing accordingly,” Credit Suisse said after a Q3 2022 meeting with Block.

Analysts have highlighted the reliance on Cash App as the key driver of Block’s stock going forward.

“In our view, performance of the Cash App business remains the most important driver of the stock,” Bank of America said in an October 2022 report.

As of March 23^rd, 2023, 23 sell-side analysts had a “Buy” rating on Block shares, 5 had a “Hold” rating, and only 2 had a “Sell” rating, according to MarketBeat.

The company’s promise has drawn in popular investors like Cathie Wood, whose ARK Funds hold a combined $651.5 million in Block stock, comprising just over 5% of the manager’s holdings, according to Cathie’s Ark, a site that tracks ARK’s holdings.

Reality: Block Has 65%-75% Fundamental Downside From Current Levels, Even If Investors Were To Ignore Our Investigation Entirely

Block’s revenue declined ~1% in 2022 versus the prior year. [Pg. 69] On a GAAP basis, Block posted a net loss of $540.7 million for 2022. Analysts expect Block will lose $208 million in 2023, according to FactSet estimates. Block’s 2022 annual report warned:

“We have generated significant net losses in the past, and we intend to continue to invest in our business. Thus, we may not be able to maintain profitability.” [Pg. 25]

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.

Despite its revenue slowdown, current unprofitability, its warning of future unprofitability, and signs of stagnation at Cash App, investors have awarded Block valuation multiples that price in an expectation of rapid growth. The company trades at an EV/EBITDA multiple of 60x and a 2023 forward P/E ratio of 40x on “adjusted” earnings, according to FactSet.

By comparison, Block competitor Paypal trades at an EV/EBITDA multiple of 16.6x, and 15.1x adjusted 2023 earnings, suggesting 62%-72% downside for Block were it to trade in line with its peer.

On a tangible book basis, many fintech competitors such as Affirm, Robinhood, SoFi and Upstart trade between 1.6x to 2.1x, whereas Block trades at ~13x tangible book. Even Paypal, which has grown revenue and generated a GAAP profit every year since re-emerging as a public company, trades at a 25% discount to Block on this basis. A re-rating closer to the peer average would represent 77.5% downside for Block.

To make up for these fundamental realities, Block has extensively relied on non-GAAP adjustments to report growth despite weakening metrics.

Block transformed its $540.7 million GAAP loss for 2022 into a $613 million non-GAAP profit, by adjusting out costs, including over $1 billion in 2022 share-based compensation, according to financial information from the company’s website.[4]

Block’s reliance on non-GAAP adjustments to report profit has increased substantially over time.

We are entering a period where the endless hype and unrealistic valuations of past years are beginning to face the financial reality of higher interest rates.

We expect this macro headwind, combined with the other issues outlined below, will result in the contraction of Block’s exaggerated claims of profitability and generous valuation multiples.

Block Has Positioned Itself As A Mission-Driven Company, Serving the “Unbanked” And Others Who Have Been Left Behind By The Traditional Banking System

Founder Jack Dorsey has described Block’s business as having a “purpose of economic empowerment.”

The company says it has chosen to serve the “unbanked” and “underbanked”, segments of the population that do not engage in traditional banking due to weak or non-existent credit scores, distrust of banks and high fees.

In 2017, Dorsey described how Block planned to continue servicing the underbanked through Cash App:

“So, from a high level, we want to make sure that we continue to build services for an underserved market. That has been what has really tied the company together for the past — close to 9 years now.”[5]

The effects of that strategy are apparent. A September 2022 Pew Research Center survey shows that Cash App has targeted low-income and minority consumers.

Block says it provides uniquely easy access to sending and receiving funds, by removing friction from the system and “adding some magic”:[6]

“Our focus is really observing what our customers are doing,” Dorsey said of the company’s approach in 2018, “and then taking as much friction out of that as possible while adding some magic at the same time.”[7]

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

With its principled mission and easy to use Cash App payment platform, Block has gained a reputation as an innovator and one of the most well-known publicly traded fintech companies.

By contrast, what we found is that the company’s payment system does not seem to offer a discernible edge over its key competitors like PayPal/Venmo, Zelle, or Apple. Rather, it seems to have simply embraced non-compliance as a tactic to grow its user base.

“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.

Cash App’s embrace of non-compliance begins by making it easy for users to get on the platform, easy for them to get back on the platform if their accounts are closed, and easy to remain anonymous or operate under blatantly false identities.

As one former said about signing up for Cash App:

“It’s wide open. And if I was a criminal, I would have done it.”

Another former compliance employee of a Cash App partnership told us, “every criminal has a Square Cash App account.”

There is even a gang named after Cash App: In 2021, Baltimore authorities arrested members of the “Cash App” gang, who were charged with distribution of fentanyl and cocaine in a West Baltimore neighborhood, according to a Baltimore news report, and criminal records.

Beyond the gang named after Cash App, numerous department of Justice indictments detail how Cash App is used by gangs, including the notorious Sinaloa cartel, to distribute drugs like fentanyl and methamphetamine. [1,2,3]

In one example, a criminal complaint against an alleged meth distribution ring describes how Cash App is commonly used by gangs to transfer illicit drug proceeds:

CEO Jack Dorsey Found It “Pretty Incredible” That Cash App Is Mentioned in Hundreds of Hip Hop Songs, As a Measure of Its Reach

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

In May 2020, Block CEO Jack Dorsey spoke at a JPMorgan investor conference about how Cash App was making its way into popular culture through thousands of mentions in hip hop music:

“We have a very mainstream customer for Cash App. And evidence of this is – I talked about this on the call, maybe on the stage before, but the number of hip-hop songs that include the phrase Cash App or even named Cash App is pretty incredible. I think it’s over 1,000 or 2,000 right now.”[8] 

At JPMorgan’s 2021 conference, Dorsey again told investors about the large number of songs named after Cash App and described how music had become a way to share with others how valuable the app is to them personally, providing them with “so much utility.”[9]

A review of songs mentioning Cash App shows that the artists are not generally rapping about Cash App’s smooth user interface and robust software integration toolkit.

Instead, lyrics describe how easy it is to move money through Cash App to facilitate fraud, traffic drugs, or even pay for murder.

[Listen to a compilation of songs mentioning Cash App here]

“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 

Block promoted the video for 22Gz’s song “Cash App” which described a turf war in which the artist pays hitmen through Cash App to murder his opposition, then stuffs their bodies in trash bags. The video opens with the artist showing his Cash App as he makes a ‘throat-slitting’ motion.

The song proceeds:

“I had a gun in my backpack.

Blicky, the blicky, run down, where that stash at? 

I pay them hitters through Cash App. 

Shooters like Mitchell, put holes in his snapback. 

We stuffin’ bodies in trash bags.”  

Block apparently embraced the PR, sponsoring a cash giveaway to promote the video, according to the producer of the video—481 people responded to the contest announcement on YouTube.

 AKLO Studios, the producer of the video, confirmed to us that Cash App was the sponsor.

The artist, 22Gz, was later arrested in June 2022 and charged with attempted murder after allegedly shooting in a crowded Brooklyn club, leaving 3 people injured.

We reached out to Cash App studios to see if we could get a more complete list of songs it has sponsored and have not heard back as of this writing.

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

Cash App takes a leading role in supporting criminals involved in human trafficking, according to the Polaris Project, a leading non-profit organization that tracks and combats human trafficking and sex exploitation in the U.S.

In a November 2021 article, Sara Crowe, a senior director at Polaris Project, said of the use of peer-to-peer apps:

“…when it comes to sex trafficking in the U.S., by far the most commonly referenced platform is Cash App.” 

Cash App responded by saying it rejects all payments tied to sex trafficking and other crimes, according to the same article.

But a reading of numerous indictments by the Department of Justice, which detail Cash App’s use to facilitate sex, including with minors, seems to refute Block’s response. [1,2,3,4,5,6] As just one example, a December 2021 Department of Justice press release details how a North Carolina man paid underage victims through Cash App for sex acts:

Once again, the signs were hard to miss. Beyond the slew of indictments referencing Cash App, numerous songs describe Cash App as the preferred option to pay for illicit sex, including songs named after the app itself. [1, 2, 3, 4, 5, 6]

According to a former compliance employee, they repeatedly saw patterns indicating Cash App’s use in sex trafficking:  

“You see a lot of Lyft or Uber rides late, always late at night like between 11:00 PM and 5:00 AM, multiple rides in one night, things like that.”

“You’ll see things like hotel purchases, and you’ll see (the device) travelling. So it’ll go like Cleveland, Ohio, and like a Motel 6 and then Columbus, Ohio, and Holiday Inn and then the next day they’re in Cincinnati, and then the next day they’re in Kentucky, and then they shoot over to Virginia, and you watch it travel.”

Block seemingly chose to ignore the signs, instead refusing to “unbank” users regardless of the circumstances.

The acceptance of illegal activity on Cash App, along with lax policies around user account creation, seems to be part of Block’s growth strategy.

Based on more than a dozen interviews with former employees involved in Cash App, pressure from management has resulted in a pattern of disregard for Anti-Money Laundering (AML) and Know Your Customer (KYC) laws.[10]

The result has been a proliferation of fake accounts that facilitated scams, resulting in Block benefitting from increased transaction-based revenue along with inflated user metrics.

Multiple former customer service reps we interviewed described how Cash App’s user data has been inflated by single individuals that have numerous associated accounts, sometimes numbering in the hundreds. Often these were associated with blacklisted accounts banned for fraud or other policy violations.

Cash App Claims To Have 80 Million Annual Transacting Active Users, A Highly Inflated Number Given Evidence Of Massive User Duplication On The Platform

The byproduct of Cash App’s approach to permitting duplicate and scam accounts is that it has reported inflated active user counts for years.

Cash App’s number of transacting active users – or account holders that make use of 1 or more Cash App service in a given time period – is a closely watched metric. [Pg. 7] It forms the foundation of Block’s claims to have a strong network effect and ability to cross sell new products and services to its user base. The company recently reported 80 million annual transacting actives, and 51 million monthly transacting actives. [11]

According to Block’s 2022 Q1 financial statements:

“Growth in monthly transacting actives on Cash App and customers’ level of engagement with our products and services on Cash App are essential to our success and long-term financial performance.” [Pg. 19]

We asked one former Cash App employee how common it was to see Cash App accounts have a dozen or more account connections, a scenario in which Cash App accounts would be overcounted:

We also asked if the former employee believed this indicated that Cash App was reporting inflated account numbers:  

Cash App’s User Tracking Software Shows That Many Users Have Dozens Or Even Hundreds Of Accounts, Suggesting Reported User Metrics Are Vastly Inflated

Cash App has used customer management software that helps visualizes how user accounts are linked by various pieces of data, according to former employees. [12]

Many look like the one below, a fairly standard relational diagram with the account under review at the far right represented by a triangle with a black dot inside.

That account is connected to dozens of others by a shared Social Security number, phone number, email address, bank account, or device.

Former customer service reps shared screenshots taken last year to demonstrate the vast number of connections between supposedly distinct accounts.

Per the legend in the CRM program, each ‘gray triangle’ represents a unique “Cash Customer”.

The connections in this example suggest that accounts can be linked to the same person, with the individual setting up and abandoning accounts or maintaining many accounts at the same time, or a combination of both, according to former employees.

“We Would Call It the Web of Lies”: Multiple Account Connections Were Common and Seen As a Red Flag of Possible Fraud

Former Employees Estimated That 40%-75% of Accounts Were Fake, Involved In Fraud, Or Were Additional Accounts Tied To A Single Actual Individual

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.

Those densely packed connections are a red flag for fraud, a former employee said:

“The people that you see that just have like 10 or so other accounts tied to them, it’s, you know, the assumption is that they must be doing something, you know, risky.”

Such accounts indicate that a person may have created multiple accounts based on stolen information, that they were moving money through a series of accounts to disguise its origin, or that they had been kicked off the system and returned multiple times for policy violations such as trying to defraud other users or the company.

Some accounts had hundreds of other account links. A third former employee summed it up: 

“I mean honestly, we would all joke and we would just call it like ‘the web of lies.”

Cash App’s “Web of Lies” Starts With A User’s Ability To Create An Account With Just An Email Address Or A Phone Number

Cash App has different levels of access and features based on how much information a user provides—the starting point requires just an email address or phone number.

During Block’s Q2 2017 earnings call, Jack Dorsey explained how the company relies on automated technology to assure the safety of its platform:

“We’ve used machine learning and data science to manage risk since the beginning of Square. We’re constantly looking for ways to make our services more automated and more self-serve, and machine learning is perfect for that.”

Dorsey explained that due to its superior technology, “we’re able to onboard individuals to Square Cash with just a ZIP Code and an email address or phone number.”

The process allows virtually anyone to join the platform as well as to send and receive funds with others on the platform.

It was always a risky proposition, according to a former compliance employee, who said Block insisted that phone numbers were the modern-day equivalent of Social Security numbers.

“Banking isn’t all that different than it was 100 years ago,” the former employee told us. That’s why reasonable compliance requires collecting more information than a phone number or email: “I need to find you if you ripped me off.”

The company continues to allow people to set up its most basic account by providing only a phone number or email and a zip code.

Cash App stresses that a bank account is not required to join:

Block Would Blacklist Accounts, But Not Individuals, Making It Easy For Bad Actors To Get Back On The Platform

By basing accounts on email addresses or phone numbers, Block created a system in which users could join the platform multiple times, even after getting kicked off for fraud.

A former employee explained that getting kicked off Cash App was just a temporary problem:

“It wasn’t like, TSA’s No-Fly list. You know it was kind of like the account will get closed and then they’ll try it again and maybe get to use it for a little while longer, until, you know, maybe the next account gets closed.”

The screenshot below shows an account can be active even though it has previously been tied to problematic accounts.  

One former employee explained that Cash App did not ban based on Social Security numbers and users could easily come up with new phone numbers or email addresses to get back on the platform. This system applied not only to basic Cash App accounts but to accounts with a Cash Card, Cash App’s prepaid card:

“Cash App will not deny you based on your Social Security number. So, they’ll deny you on your e-mail or your phone number, but if you get a new phone number or a new email, you can come back through to get the card because you’re not blocked by your Social Security number, so you can come right back in.”

None of this is news to scammers—the ability for users blacklisted for fraud to easily get back on the platform is so widely known that it is once again reflected in pop culture.

In 2020, an artist called Teejayx6 released a song titled “Cash App”, which focuses on various methods of scamming, including lyrics about how easy it is to get back on the platform after having an account blacklisted:

“They banned my Cash App because I sent a thousand transactions…I just bought another phone and made a Cash App”.[13]

Examples of Obvious Fake Identities Abound: “Jack Dorsey” Has Multiple Accounts, Including Some That Appear Aimed At Scamming Cash App Users

There Are Dozens Of “Elon Musk” And “Donald Trump” Fake Accounts As Well

Another sign of illegitimate account creation can be seen in the number of Cash App users who are impersonating others on the platform.

A search for Cash App account holders with the name “Jack Dorsey” turns up numerous accounts, including a number with “cash tags” that could be used to mislead and scam other users. 

These include “$CUSTOMERSERVICE2022” and “$dailysweepstakes”.

The name “Elon Musk” also appears on dozens of obvious fake or scam Cash App accounts.

We found 50 Cash App accounts under the name “Donald Trump” in late November, including ones with “cash tags” such as “$donaldtrump24” and “$TrumpApproveDonation”.

Donald Trump’s official campaign donations appeared to be processed through the “Winred” platform, which doesn’t allow “P2P” payment options, suggesting that any Cash App accounts collecting donations for Trump are fraudulent.

It was easy for wrongdoers to impersonate some of the most well-known and high-profile people in the world. This also seems to be the case for regular users, who have filled social media forums like Reddit and the Better Business Bureau (BBB) with complaints about identity theft, account hacks and fake user scams. [1,2,3,4]

Cash App’s System Allows Users To Change Their Names To Ones That Don’t Match The Names Provided When They Created Their Accounts, According To Former Employees

To Test This, We Turned Ourselves Into Donald Trump And Elon Musk. We Were Easily Able To Send And Receive Funds

Cash App’s Terms of Service state that users agree to provide accurate information when setting up their account, and to assure that any information added to the account is “true and accurate.”

The terms explicitly state that users “may not select a $Cashtag that misleads or deceives others as to your business or personal identity or creates an undue risk of chargebacks or mistaken payments.”

Cash App makes no mention of deceptive screen names, and it allows users to change these names and their photo in a few simple steps. Users can obfuscate their personal identity without notifying Cash App or having any changes made to the platform’s internal data.

To test this (1) we created two Cash App accounts (2) changed our outward facing personas to Elon Musk and Donald Trump and (3) successfully exchanged funds.

We Ordered a Cash App Card For An Obviously Fake Persona, Checking to See If Block’s Compliance Would Take Issue

We Promptly Received Our Donald J. Trump Visa Cash App Card In The Mail

Taking it a step further, we ordered a Cash Card under this alias to see if Cash App’s compliance would take issue with the obvious irregularity. They promptly mailed us a Donald J. Trump Cash Card.

How It Impacts Regular Users: A Pastor Complained That Scammers Were Stealing Hundreds of Dollars from His Parishioners Using Counterfeit Accounts

It Took 2 Months, a News Report, and a Congressman Just to Remove the Phony Accounts. The Money Was Never Recovered

Cash App has been exceedingly slow to take any measures to remedy instances of fraud on its platform, even in high-profile situations.

Reverend Bartholomew Orr, the pastor at Brown Missionary Church in Southaven, Mississippi, lost hundreds of dollars to phony Cash App accounts, according to media reports.

In June 2022, Orr discovered that he wasn’t receiving money sent by parishioners. He learned that parishioners were directing their money to scam Cash App accounts set up to impersonate his account.

On the day Fox News interviewed Orr about the situation, the counterfeit accounts continued to be active on Cash App.

We spoke by phone with Pastor Orr who said that when he initially approached the company, he was told it would expedite an investigation, but nothing happened:

“I don’t think they actually did anything.”

“When I saw that it was still going on, I called them back, and addressed it, and they said they were going to expedite it again. This particular time, of course, I involved the news, as well as Congressman Steve Cohen’s [R-Tenn.] office.”

The scam accounts disappeared several days later, but neither Pastor Orr nor his parishioners received any of the money sent to those accounts and Orr doesn’t expect they ever will:

“They are saying that whenever someone sends money via Cash App, you know, if you sent it to the wrong person, you just sent it to the wrong person.”

Block Obfuscates How Many Individuals Are On The Cash App Platform By Reporting Misleading “Transacting Active” Metrics

Block’s disclosures have referenced the issue of “transacting active” account metrics deviating from the number of genuine users on its platform. But its vague disclosure suggests that “transac