Block appears to be squarely in the government's crosshairs. Prosecutors in the Southern District of New York are reportedly investigating major compliance failures at the parent company of Square and Cash App. NBC News says A former Block employee turned over documents to federal authorities showing how the company failed to collect required risk assessment information from customers and subsequently processed illegal transactions.
The documents allegedly show that Block greenlit multiple crypto transactions involving known terrorist organizations. Additionally, Square reportedly processed thousands of transfers involving countries under economic sanctions. “From the beginning, everything in the compliance section was flawed,” the whistleblower allegedly said. NBC News. “It is run by people who should not be in charge of a regulated compliance program.”
Most of the transactions allegedly involved credit cards, dollar transfers or bitcoin and were not reported to the government as required by law. Additionally, Block reportedly refused to “correct the company's processes” when notified of the violations.
The investigation follows a separate report of NBC News in February highlighting two different whistleblowers who pointed out the same problems at Block. They cited “questionable Cash App transactions with entities sanctioned by the Treasury Department's Office of Foreign Assets Control, operations known to sell personal information and credit card data for illegal purposes, and offshore gambling sites prohibited to U.S. citizens.” .
The practice supposedly lasted for several years. NBC News says it reviewed about 100 pages of whistleblower documents involving people or organizations in countries under U.S. sanctions, including Russia, Iran, Venezuela and Cuba. Some of them reportedly date back to 2023.
The whistleblower claims that Block management was aware of the alleged crimes. “As I understand it from the documents, the block leaders and board of directors were aware of the compliance failures in recent years,” said Edward Siedle, a former SEC attorney representing the whistleblower. NBC News.
The whistleblower claims that in addition to senior management, Block's board of directors was also informed of the compliance issues. Coincidentally or not, several board members recently made unexpected departures, including former U.S. Treasury Secretary Lawrence Summers, who resigned in February, and Sharon Rothstein, who had been on the board since 2022, Block said. NBC News that they were leaving to devote more time to other activities and that their departures were not “the result of any disagreement with the company on any matter related to the company's operations, policies or practices.”
In recent years, federal authorities have become increasingly interested in modern financial platforms, after at least some of them have become a kind of Wild West. Of course, FTX's fraudulent practices and subsequent collapse caused a seismic decline in the cryptocurrency industry. Although it's unclear if the feds have gotten involved, Elon Musk's x (the shell of what was once Dorsey's twitter) is reported to have violated US sanctions by accepting blue check subscription payments from terrorist organizations.
