Shares of Australian buy-now-pay-later firm Zip Co suffered their worst-ever trading day after the company disclosed a significant external fraud incident in the United States. The stock fell as much as 50.5%. The coordinated attack temporarily hurt transaction volumes and customer growth in the company’s first quarter.
Individuals used legitimate credentials to open new accounts and make transactions they did not pay for. The incident resulted in A$10.1 million (US$7.2 million) in cash operating expenses. Net bad debts rose to 1.97% of transaction volume.
Zip said it has contained the issue and lodged an insurance claim. The incident has raised investor concerns about the company’s onboarding controls and risk management.