Shares of Jack Dorsey‘s Block plunged nearly 15% by Thursday’s close after short seller Hindenburg Research announced that the payment company was its latest short position, alleging that Block allowed criminal activity to operate with lax controls and “highly” inflates Cash App’s transacting user base, a key metric of performance.

Hindenburg described Block’s internal systems as a “‘Wild West’ approach to compliance.”

“Our 2-year investigation has concluded that Block has systematically taken advantage of the demographics it claims to be helping,” Hindenburg said in its report. The research firm said Block’s Cash App thrived on serving “unbanked” customers.

The report alleges those unbanked customers were involved in criminal or illicit activity. Hindenburg also alleged that Cash App’s compliance programs were deficient.

Jack Dorsey, co-founder and chief executive officer of Twitter Inc. and Square Inc., speaks during the Bitcoin 2021 conference in Miami, Florida, U.S., on Friday, June 4, 2021.

Eva Marie Uzcategui | Bloomberg | Getty Images

As part of its two-year investigation, Hindenburg spoke with multiple former employees who described how internal concerns were suppressed and user concerns were ignored, even as alleged “criminal activity and fraud ran rampant on its platform.”

The firm’s extensive report includes screenshots of internal systems and employee messages. It also highlighted alleged financial misreporting.

Up to 35% of Cash App’s revenue is derived from interchange fees, Hindenburg alleged. That’s around $892 million in revenue that the short seller said should be capped by law.

But Block, formerly known as Square, avoids that regulatory cap imposed on large financial institutions by routing the revenue through a small bank, Hindenburg alleged.

The small-bank routing method is one employed by Block rival PayPal, Hindenburg claimed, and which prompted a Securities and Exchange Commission probe.

“A Freedom of Information Act (FOIA) request we filed with the SEC indicates that Block may be part of a similar investigation,” Hindenburg wrote.

PayPal did not immediately respond to a request for comment.

Hindenburg took issue with Cash App’s practices during the Covid pandemic, when the government issued stimulus checks to qualified American adults. The report alleges that the lockdowns “posed an existential threat” to Block’s critical merchant services business.

“CEO Jack Dorsey Tweeted that users could get government payments through Cash App ‘immediately’ with ‘no bank account needed’ due to its frictionless technology,” the report said.

Just a few weeks into Cash App’s delivery of the first round of government payments, states were apparently trying to claw back suspected fraudulent payments — “Washington State wanted more than $200 million back from payment processors while Arizona sought to recover $500 million,” said Hindenburg, citing multiple former employees.

Citing interviews with former employees, Hindenburg alleged that “pressure from management has resulted in a pattern of disregard for Anti-Money Laundering (AML) and Know Your Customer (KYC) laws.”

The report notes that “this appeared to be an effort to grow Cash App’s user base by strategically disregarding Anti Money Laundering (AML) rules.”

To test the theory, the short seller opened accounts in the name of former President Donald Trump and Tesla CEO Elon Musk, and then obtained a Cash App card, called the Cash Card, under the “obviously fake Donald Trump account,” the report said.

The card bearing Trump’s name arrived “promptly” in the mail.

“Former employees estimated that 40%-75% of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual,” the report said.

“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,” Hindenburg wrote.

Block responded to the Hindenburg report later on Thursday. “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 press release.

“We are a highly regulated public company with regular disclosures, and are confident in our products, reporting, compliance programs, and controls. We will not be distracted by typical short seller tactics,” Block added.