Block disclosed to the SEC on May 7 that it has set aside $240 million to resolve a potential Justice Department action over alleged failures in anti-money laundering and know-your-customer compliance at Cash App.
The DOJ handed Block proposed settlement terms in March. Block pushed back: the company “disputes the basis and methodology underlying the DOJ’s assessment of the matter,” and countered in April. Discussions are ongoing.
The dispute traces to a March 2023 Hindenburg Research report that alleged Cash App was a platform for criminal activity, with lax fraud controls enabling duplicative accounts and fraudulent payments. Hindenburg, which disclosed a short position in Block shares at the time of publication, based its findings on more than a dozen interviews with former Block employees during a two-year investigation. Block called the report “factually inaccurate and misleading” and threatened legal action. Hindenburg shut down last year.
The SEC closed its parallel investigation in March without recommending enforcement. DOJ didn’t.
Block’s compliance tab isn’t shrinking. Last year, the company paid $255 million to the CFPB and 48 states over weak security protocols in Cash App. It also paid $40 million to New York financial regulators in a separate civil enforcement action — bringing its recent regulatory total to $295 million before any DOJ resolution.
Block warned that the ultimate resolution “could result in losses in excess of the amount accrued,” and that those losses could be “material.” The two sides are still negotiating.
James Okafor