Problems at Marqeta (MQ)
Marqeta (NASDAQ: MQ — $3.09 billion) describes itself as “the world's first modern card issuing platform” that is “modernizing financial services by making the entire payment experience native and delightful.” In reality, The Bear Cave believes Marqeta is a financial platform in distress with its biggest customer, Block, and its biggest banking partner, Sutton Bank, both under the aggressively growing scrutiny of regulators. The Bear Cave further believes that Marqeta, through its partnership with Cash App, is facilitating criminal payments and becoming the preferred payment processor for child pornography.
Marqeta’s largest customer is Block (NYSE: SQ — $49.0 billion), the parent company of Cash App, which accounted for 68% of Marqeta’s revenue in 2023. Marqeta’s involvement with Cash App dates back to 2016 when Marqeta “entered into a master services agreement with Block” and “agreed to manage Block’s Cash App.” That agreement was recently renewed into 2027, although with more limited terms, and has helped propel Marqeta’s total payment processing volume to $222 billion in 2023, up from $111 billion in 2021.
A small portion of that volume likely came from Kyle White, the owner of a child pornography site “The Ho Zone” that was recently shut down by prosecutors from the Southern District of New York.
In announcing charges in January 2024, Damian Williams, the United States Attorney for the Southern District of New York, said,
“Kyle White’s alleged conduct is abhorrent and depraved. As alleged, from behind a computer screen in the comfort of his own home, White ran a lucrative and illegal online pornography marketplace called ‘The Ho Zone,’ where he sold access to child pornography and illegally obtained adult pornography to thousands of people. White’s alleged callous disregard for his victims is striking — White profited at the expense of innocent children.”
The complaint filed by prosecutors includes screenshots of the site’s payment page that shows a clear preference for Cash App. The main page reads, in part,
“If you live in the US/UK use Cash App! If not, use crypto…”
The payment page directs users to send money to the Cash App account “TheHoZone2,” which currently remains active. A search by The Bear Cave for “TheHoZone” on Cash App was also redirected to another active account “kwhitcash69.” The payment page for TheHoZone also promoted a Cash App referral link to encourage child pornography purchasers to download Cash App for a $5 referral bonus. That link also remains active with “The Ho Zone” logo on the Cash App referral page.
In short, one of the largest distributors of child pornography in the United States was recently arrested, used Cash App as his primary payment method, and still has at least two active accounts and an active referral link.
The complaint also suggests that Kyle White used a fake address from the television series Breaking Bad for one of his Cash App accounts and ultimately transferred over $100,000 through a Cash App card issued by Sutton Bank: