Federal prosecutors have intensified their scrutiny of Block Inc., the financial technology firm co-founded by Jack Dorsey over allegations of widespread compliance failures and sanctions violations.
According to two sources familiar with the matter as reported by NBC news, the investigation by the U.S. Attorney’s Office for the Southern District of New York stems from a disclosure made by a former Block employee who handed over a substantial 100-page dossier.
The documents revealed what the whistleblower alleges to be significant compliance deficiencies within Square and Cash App, two companies under Block’s umbrella.
Additionally, the materials provided to prosecutors shed light on inadequate customer data collection practices at Block. They suggest the company facilitated numerous transactions involving countries subject to U.S. economic sanctions, including Cuba, Iran, Russia, and Venezuela.
The former employee claims that Block processed cryptocurrency transactions for entities associated with terrorist organizations.
“From the ground up, everything in the compliance section was flawed,” a former Block worker told NBC News, alleging that “thousands” of questionable transactions went unreported to the Office of Foreign Assets Control (OFAC), which enforces economic sanctions.
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Block reaffirms compliance commitment
In response to the allegations, a Block spokesperson reaffirmed the company’s commitment to maintaining a robust compliance program, emphasising its dedication to adapting practices to tackle emerging threats and evolving regulatory environments.
“Block has a responsible and extensive compliance program, and we regularly adapt our practices to meet emerging threats and an evolving sanctions regulatory environment,” the spokesperson stated.
“Our compliance program includes systems, tools, and processes for sanctions screening, as well as investigating and reporting on sanctions issues in accordance with our regulatory obligations.”
Recall that in an April 2022 filing with the United States Securities and Exchange Commission (SEC), Block disclosed that a former employee had downloaded and accessed company documents containing customer data.
According to Block, the compromised data included users’ full names, their portfolio values, portfolio holdings, and stock trading activity from one trading day.
Introduced in October 2013, Cash App allows users to send and receive money instantaneously among themselves and conduct stock and Bitcoin transactions.
As of December, the app had amassed 56 million active transacting accounts and processed a whopping $248 billion in inflows during the previous four quarters, according to company disclosures.
Read Also: Jack Dorsey’s Block to Launch Bitcoin Mining Rig
Rising crypto crackdown in U.S.
In the last three years, the U.S. government has fiercely clamped down on prominent crypto companies and exchanges. In March 2023, the Biden administration issued its “Economic Report of the President,” in which it argued that cryptocurrency is not a valuable technology. The report centred on a string of crypto-related criminal frauds that have occurred in recent years.
To this end, FTX founder Sam-Bankman Fried was sentenced to 25 years in prison after being found guilty on seven counts of fraud that led to the FTX exchange implosion.
Read Also: Whales Shift Millions of XRP As Ripple-SEC Legal Battle Intensifies
In April 2024, Binance founder and former CEO Changpeng Zhao was sentenced to 4 months in prison by a federal judge for violations of U.S. Anti-Money Laundering (AML) laws.
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