Block speaks out again after the short seller’s allegations. The stock goes up.

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The stock rose Thursday after the payments group answer to some of the allegations of a short seller.

Last week, Hindenburg Research disclosed a short position in the company, alleging that Block (Ticker: SQ) inflated user metrics and failed to curb illegal user activity on its cash app platform. A short position is a bet that a stock will go down: Trying traders borrow shares of a company and then sell them, hoping to buy them back later at a lower price.

Block shares fell 15% the day after the Hindenburg report – closing at $61.88 on March 23 – and were up 3% to nearly $68.50 by midday this Thursday.

block said last week The report was inaccurate and would consider legal action against Hindenburg. On Thursday in response to what it described as questions from investors about improper activity and fraud On the platform, the company said it had “denylisted” 2.4% of Cash App accounts that had transacted in the past year. This process prevents, among other things, from sending and receiving funds, using a Cash App Card, taking out a loan, or buying stocks or bitcoin.

“Building a trusted platform and fighting fraudulent and other illegal activities is a top priority for Cash App and Block more broadly,” the company said.

Hindenburg had cited former employees who said 40% to 75% of the accounts they reviewed were fake, linked to fraud, or had multiple accounts linked to the same person. That would fundamentally change the calculus behind estimates for revenue and earnings, and affect Wall Street’s valuation of Block.

Late last year, Block reported that it had more than 51 million monthly active users. Of those, around 44 million are associated with an identity verified through its verification program, the company said on Thursday. Those accounts represented 39 million unique Social Security numbers, the group added, noting they “believe[s] this approach is more conservative than potential alternative measurements.”

Block’s response, which is much broader than his initial response, appears to be garnering cautious approval from Wall Street.

“Block’s refutation is a positive step, but it fails to address a key concern, which is the level of [gross profit] generated by illegal activities. Bad actors also have social security numbers. We hope to hear more details from Block in the coming weeks,” said Dan Dolev, an analyst at Mizuho Securities. Dolev has a “buy” rating on block stocks.

A key allegation by Hindenburg was that Block benefited from assisting in the fraud, which the company denies. Block collects transaction fee revenue.

Write to Jack Denton at jack.denton@barrons.com