Federal prosecutors in the United States are currently investigating Block, Inc., a fintech company owned by Jack Dorsey, following the leak of documents exposing widespread compliance violations at its payment subsidiaries, Square and Cash App. The leaked documents, disclosed by a whistleblower, indicate that the company processed cryptocurrency transactions linked to sanctioned countries and terrorist organizations due to inadequate checks.
According to sources familiar with the matter, the former employee handed over documents to prosecutors from the Southern District of New York during discussions, demonstrating that Square and Cash App fail to provide customers with sufficient information to assess the risks involved. The documents also reveal that Square facilitated numerous transactions involving countries under economic sanctions, while Block processed several cryptocurrency transactions on behalf of terrorist organizations. The majority of these transactions, including dollar transfers, credit card transactions, and Bitcoin transfers, were not reported to the government as required.
The whistleblower’s report indicates that when Block was informed of these breaches, it failed to rectify its processes. This report is corroborated by the former employee who spoke with prosecutors and NBC News. The former employee provided approximately 100 pages of documents to NBC News, detailing transactions involving entities in countries subject to U.S. sanctions, such as Cuba, Iran, Russia, and Venezuela. Most of these transactions involved small amounts of money. The correspondence also supports the claim that Block continued to facilitate transactions with sanctioned entities even after becoming aware of their misuse of its services.
Edward Siedle, a former Securities and Exchange Commission attorney representing the whistleblower, stated that the documents suggest Block’s leadership and board were aware of compliance lapses in recent years. In response to these claims, a Block spokeswoman emphasized the company’s commitment to a robust compliance procedure. She stated that Block is dedicated to modifying its compliance procedures to address new risks and changing regulatory frameworks. However, NBC was unable to obtain direct responses from the company regarding its compliance failures. Block stated that its external counsel, consultants, and in-house legal team are advising on the matter and recommending appropriate remediation. The company also mentioned that it regularly screens all its merchants for sanctions.
This investigation into Block, Inc. aligns with a broader increase in legal actions against cryptocurrency companies in the United States. For instance, on April 30, Binance founder Changpeng Zhao received a four-month prison sentence after pleading guilty to failing to maintain a legally compliant anti-money laundering program at the cryptocurrency exchange. Additionally, the co-founders of Samourai Wallet, a Bitcoin wallet and crypto mixer, were arrested on money laundering charges on April 24. They pleaded not guilty in court and were released on a $1 million bond. Consensys, an Ethereum development firm, also filed a lawsuit on April 25, accusing the SEC of trying to gain control over the future of cryptocurrency through enforcement actions aimed at classifying Ether as a security. Consensys revealed that it had received a Wells notice from the SEC on April 10, which often precedes enforcement proceedings.