Reports indicate that federal prosecutors in the United States are currently probing Block, Inc., a fintech firm under the ownership of Jack Dorsey. This investigation follows the emergence of documents purportedly revealing widespread and ongoing compliance breaches within the company's payment arms, Square and Cash App, leaked by a whistleblower.
As per two informed sources, on Wednesday, the company, co-founded by Twitter's creator, purportedly facilitated cryptocurrency transactions linked to sanctioned nations and terrorist entities due to insufficient oversight measures.
Block Faces Government Probe
During discussions, prosecutors in the Southern District of New York were furnished with a comprehensive set of documents by the former employee. These documents serve to elucidate the assertion that Square and Cash App patrons are conspicuously deprived of the requisite information to gauge their associated risks comprehensively.
Moreover, the documents above paint a concerning picture, revealing that Square oversaw an extensive array of transactions numbering in the thousands, entailing countries currently under the weight of economic sanctions. Simultaneously, Block, the parent company, purportedly facilitated a number of cryptocurrency transactions on behalf of designated terrorist organizations.
In a further revelation, the former employee articulated that the lion's share of the transactions broached during discussions with prosecutors, spanning dollar transfers, credit card transactions, and Bitcoin exchanges, remained unreported to the government, thus falling short of regulatory obligations.
❖ JACK DORSEY'S BLOCK FACES SCRUTINY FROM FEDERAL AUTHORITIES OVER NON-COMPLIANT CRYPTO SERVICES
— *Walter Bloomberg (@DeItaone) May 1, 2024
Federal prosecutors are scrutinizing Block’s crypto unit, working with whistleblowers to investigate the company's compliance practices, two sources familiar with the matter told…
The expose reveals that despite being notified of the breaches, Block neglected to rectify its company procedures. The report was corroborated by a former employee who communicated with prosecutors and NBC News.
Approximately 100 pages of documents provided by the former employees were submitted to NBC News. These documents detail transactions with entities from countries under U.S. sanctions, including Cuba, Iran, Russia, and Venezuela. The transactions, some as recent as last year, mostly comprised small dollar amounts.
Furthermore, the correspondence trail confirms allegations that Block persisted in facilitating transactions with sanctioned entities even after becoming aware of their misuse of its services.
How does Block position itself here?
According to former Securities and Exchange Commission attorney Edward Siedle, representing the whistleblower, the documents suggest that compliance violations were known to Block leadership and the board in recent years.
In response to these claims, a spokeswoman for Block reiterated the firm’s commitment to maintaining robust compliance procedures. She emphasized Block’s proactive approach to adjusting its compliance protocols to address emerging risks and evolving regulatory landscapes.
Regarding NBC's inquiries about compliance failures, the fintech company did not provide direct responses. Block stated in a release that its external counsel, consultants, and in-house legal team are advising on the matter and recommending appropriate remedial actions. Additionally, the company highlighted its routine screening of all merchants for sanctions.
Scrutiny Tightens Within the Crypto Community
The reported investigation into Block, Inc. aligns with a surge in legal actions against cryptocurrency companies in the United States.
On April 30, Binance founder Changpeng Zhao was sentenced to four months in prison after pleading guilty to failing to maintain a legally compliant anti-money laundering program at the cryptocurrency exchange.
The co-founders of Samourai Wallet, a Bitcoin wallet and crypto mixer, were arrested on money laundering charges on April 24. They later pleaded not guilty in court and were released on a $1 million bond.
Consensys, an Ethereum development firm, filed a lawsuit on April 25, accusing the SEC of attempting to control the future of crypto through enforcement actions aimed at classifying Ether as a security. Consensys revealed it had received a Wells notice from the SEC on April 10, a precursor to enforcement proceedings.