Square is absolutely liable for any fraud. They are playing the role of the merchant in this chain. The cc companies will push any chargebacks to Square who, be

Square is absolutely liable for any fraud. They are playing the role of the merchant in this chain. The cc companies will push any chargebacks to Square who, because they have decided to take away the security of a traditional merchant account, have little or no ability to reclaim funds from their merchants, especially fraudulent ones. Additionally, if the fraud and charge back rates get too high, say over a few tenths of a percent (!), the cc companies will either cut them off or raise their interchange rate -- either one kills their business model.