Ages-old debate — KYC versus privacy ( or Hindenburg versus Dorsey)

Hindenburg Research, a financial research firm, recently released a report alleging that Jack Dorsey’s Block, previously known as Square, facilitated fraudulent activities that allowed criminals to use the platform for their criminal endeavors.

Is that a novelty? Some online platforms used for fraud?

The report accuses the company of inflating user metrics by failing to implement know-your-customer (KYC) procedures.

The official and default description of KYC is that it stands for “Know Your Customer.” It is a process that financial institutions and businesses use to verify the identity of their customers and assess potential risks of illegal intentions. KYC policies are meant to protect businesses and financial institutions from being used to launder money or finance illegal activities. During the KYC process, customers must provide identification documents such as a passport or driver’s license, and the information is cross-checked with government databases to confirm the authenticity of the information provided. KYC helps businesses and financial institutions to identify and prevent potential fraudulent activities, protect their reputation, and comply with regulations.

In reality, it is just a fancy word used to describe another tool of oppression and control. Because the government HAS to know absolutely everything that you do.

The report highlights that Block, which was previously focused on serving the underbanked and underserved, allowed each user to create dozens or even hundreds of Cash App accounts. The lax requirements for account creation led to fraud-related activities, with an estimated 40%-75% of accounts being fake or extra accounts tied to a single individual.

Cash App is a mobile payment service developed by Square, Inc. that allows users to send and receive money digitally. It is a peer-to-peer payment app that can be used to send and receive money between friends and family members or to pay for goods and services. Cash App users can also use the app to buy and sell Bitcoin, the popular cryptocurrency. The app is available for download on both iOS and Android devices.

Block is focused on serving the underbanked and underserved, which would deem KYC contra-productive and a privacy risk.

The company’s policies of banning accounts rather than individuals allowed blacklisted criminals to quickly onboard again by using a different email or phone number.

The report also criticizes Cash App’s feature that enables each user to change their name and still use the platform’s services, pointing out that there were multiple “Elon Musk” and “Jack Dorseys” on the app.

Like pretty much everywhere else…

Hindenburg’s report further claims that Cash App served as a platform for scammers to organize fraudulent Covid-19 relief payments, following Jack Dorsey’s announcement that users without a bank account could receive the benefits.

Any platform whatsoever so far was used as a platform for spreading fraudulent offers, let’s start with Google. But, I don’t see anyone mentioning Gmail being in a severe situation.

Former employees consulted by Hindenburg revealed that Block started receiving tens of thousands of complaints from several states, leading to rampant fraud related to these payments.

Expected. But, were they successful?

Hindenburg’s disclosure indicates it has taken a short position on Block’s stock price. At the time of writing, the company’s stock price has fallen by 10%.

The allegations against Block are considered severe and could negatively impact the company’s reputation and stock price.

But, will they?

It remains to be seen how the company will respond to these allegations and what measures it will take to address the issues highlighted in Hindenburg’s report.

They will probably do absolutely nothing.