Roblox launched for PC in 2006, its original premise being that “games were the next frontier for education software.” Kids were able to play large multiplayer games together, as well as create their own servers using relatively simple coding language. The content of the games mainly consisted of premises geared toward younger children, and the game quickly grew in popularity.

The game became even more widely accessible after its release as a mobile game for iOS in 2012, and for Android in 2014.  Roblox‘s immense popularity is undeniable with around 78 million current users, according to Bloomberg. Roblox has about 3,000 employed moderators, which is significantly less than comparable social media platforms. TikTok, for instance, employs 40,000 moderators despite only having three times more daily users than Roblox. More than 40% of the game’s players consist of preteens and it is advertised specifically toward children, leading to unique market hazards.

On Tuesday, Roblox saw its stock take a significant hit. It has fallen 9.4% since early trading and down by 3% as of midday trading, having already dropped 15% percent this year. This sudden plummet comes from a report released by Hindenburg Research, an investment firm that “specializes in forensic financial research.” In the report, they alleged that that Roblox tampered with its number of users and how long these users spent playing the game.

Our research indicates that Roblox is lying to investors, regulators, and advertisers about the number of “people” on its platform, inflating the key metric by 25-42%+. We also show how engagement hours, another key metric, is inflated by an estimated 100%+.

This report, which was based partially on interviews with former Roblox employees, suggests that the company is intentionally allowing bots to populate the platform in order to inflate its numbers. Hindenburg also claimed that Roblox has been “compromising child safety in order to report growth to investors.” The report brings up an example in 2018 in which, “prior to Roblox going public, a 29-year-old was caught by police with 175 hours of video footage of him grooming and engaging in explicit behavior with 150 minors using online platforms, namely Roblox.”

As part of Hindenburg’s research, they attempted to create profiles on Roblox with the names of two well-known pedophiles, Jeffery Epstein and Earl Brian Bradley. In doing so, they claim that both of the usernames were already taken, with Jeffery Epstein’s name having more than 900 variations in use.

In response to Hindenburg’s highly critical report, Roblox responded in a statement refuting their claims. The company states that they take “any content or behavior on the platform that doesn’t abide by its standards extremely seriously,” and that they have a “robust set of proactive and preventative safety measures designed to catch and prevent malicious or harmful activity on the platform.” Roblox included a link to a “Special Note Regarding Operating Metrics” in the response.

Hindenburg Research commentated on Roblox’s response in a post on X (formerly twitter), in which they claimed that the company failed to address two of their core allegations.

Roblox’s response is an abject failure to address the two core allegations in our report, including:

1. Evidence that Roblox has been systematically lying for years about the number of people on its platform and their genuine level of engagement.

2. That the platform is a… pic.twitter.com/Tj2KiANOnI

— Hindenburg Research (@HindenburgRes) October 8, 2024

In Roblox’s response, they state that they look forward to “discussing (their) most recent financial results and answering any questions on the company’s third quarter earnings call on October 31, 2024.”