Hindenburg Research is accusing financial services and mobile payments company Block Inc., led by Twitter co-founder Jack Dorsey, of systematically taking advantage of the demographics it was designed to help.

Block, formerly known as Square Inc., claims to have developed a "frictionless" and "magical" financial technology with a mission to empower the "unbanked" and the "underbanked," according to the report by the investment research firm with a focus on activist short-selling.

"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," Hindenberg asserted.

The firm drew its conclusions following a two-year investigation in which it spoke with former employees, partners and industry experts, extensively reviewed regulatory and litigation records, and filed Freedom of Information Act (FOIA) and public records requests.

Hindenburg also claims Block overstated its user numbers while understating its customer acquisition costs. According to the report, former Block employees estimated that 40% to 75% of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual.

In response, Block said on Thursday the company intends to work with the Securities and Exchange Commission (SEC) to explore legal action against Hindenburg Research for the factually inaccurate and misleading report.

"Hindenburg is known for these types of attacks, which are designed solely to allow short sellers to profit from a declined stock price," the company stated in a release. "We have reviewed the full report in the context of our own data and believe it’s designed to deceive and confuse investors."

Block also said they are a highly regulated public company with regular disclosures, and they are confident in their products, reporting, compliance programs and controls. 

"We will not be distracted by typical short seller tactics," the statement finished. 

Reuters contributed to this report.