• Most of Jack Dorsey's fortunes are linked to his $3 billion stake in Block
  • The Twitter co-founder's net worth has plunged to $4.4 billion
  • Block has since threatened to sue Hindenburg

The co-founder and chief executive of payments company Block, Jack Dorsey, has lost hundreds of millions from his fortune after short-seller Hindenburg Research released a report alleging the company overlooked fraud and misled investors with the number of users.

Dorsey is now worth $4.4 billion after his fortune plunged by 11% to the tune of $526 million, Bloomberg reported. The Twitter co-founder's net worth was at $5.41 billion Wednesday, which ranked him 456th on the Bloomberg Billionaires Index. By Thursday, his name was no longer on the list of the world's 500 richest people on a daily basis.

Dorsey's net worth was affected by an unprecedented decline in Block's share price this week, according to Bloomberg. Most of the tech entrepreneur's fortunes are linked to his $3 billion stake in Block.

The payments firm's stocks plummeted as much as 22% earlier Thursday and closed 15% lower later in the day after Hindenburg published a scathing report that alleged inflation of metrics and widespread fraud among Block users, as per Insider.

"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 titled "Block: How Inflated User Metrics and 'Frictionless' Fraud Facilitation Enabled Insiders to Cash Out Over $1 Billion."

"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," the short-seller alleged.

Former Block employees revealed that between 40%-75% of user accounts they reviewed were dummy accounts and were "involved in fraud." Hindenburg further alleged that even after Block caught users who engaged in fraud or other prohibited activities, the accounts were blacklisted but the linked users were not banned.

Dorsey co-founded Block – previously Square – with Jim McKelvey in 2009. The company went public in 2015.

Earlier last year, Celebrity Net Worth estimated Dorsey's wealth at $7 billion. At the time, the celebrity wealth website said Dorsey's 18 million shares in Twitter, after Elon Musk agreed to acquire Twitter in April 2022, were cashed out at around $974 million.

Dorsey owns around 43 million Block shares with an estimated worth of around $4.5 billion in 2022, according to reports. Dorsey still has a $388-million stake in Twitter, which he co-founded in 2006 and left in 2021, as per NDTV.

In 2015, after a huge round of layoffs, Dorsey gave about a third of his shares back to Twitter employees. Observers deemed the move as one geared towards improving employee morale, according to TechCrunch.

In 2020, the 46-year-old tech mogul pledged $1 billion of his Block shares towards helping with relief efforts during the COVID-19 pandemic. The said amount represented about 28% of his overall wealth, Reuters reported at the time.

Meanwhile, Block said it was looking to "explore legal action" against Hindenburg's claims. The payments firm said the short-seller wanted to "deceive and confuse" Block's investors, according to Forbes.

Hindenburg's report on Block came weeks after Dorsey rolled out the first codes of the decentralized Twitter alternative, Bluesky. Developers can use codes through GitHUb where basic commands and a software developer kit is available. First introduced in 2019 as a Twitter initiative, the app shares many similarities with the Elon-Musk owned social media platform, although observers said Bluesky has a more simplified user interface.

Dorsey's Block isn't the only company Hindenburg Research has "exposed" so far in the year.

In January, Hindenburg unveiled a report that accused Indian conglomerate Adani Group of "a brazen stock manipulation and accounting fraud scheme over the course of decades."

"Even if you ignore the findings of our investigation and take the financials of Adani Group at face value, its 7 key listed companies have 85% downside purely on a fundamental basis owing to sky-high valuations," Hindenburg said in its report, titled "Adani Group: How the World's 3rd Richest Man is Pulling the Largest Con in Corporate History."

Twitter CEO Jack Dorsey addresses students during a town hall at the Indian Institute of Technology (IIT) in New Delhi
Twitter and Block co-founder Jack Dorsey's fortunes have been hit hard by a Hindenburg Research report on Block.