U.S. prosecutors investigate Block, Inc. after whistleblower claims it processed transactions from sanctioned countries and terrorist groups.
According to reports, federal prosecutors in the United States are investigating Block, Inc., a fintech company owned by Jack Dorsey. This investigation comes after documents allegedly exposing persistent and extensive compliance violations at the firm’s payment subsidiaries, Square and Cash App, were leaked by a whistleblower.
NBC News reported on May 1 that prosecutors from the Southern District of New York were allegedly given documents by a former Block employee that demonstrated that Square and Cash App processed thousands of transactions for users in countries subject to economic sanctions and cryptocurrency transactions for terrorist organizations.
Approximately one hundred pages of the documents were provided to NBC News, which reported that numerous transactions involving entities in countries subject to economic sanctions by the United States, including Iran, Russia, Cuba, and Venezuela, were for minor dollar amounts.
According to the whistleblower, most of the transactions discussed with prosecutors involved credit cards, fiat currency, and Bitcoin BTC.
The government was not informed of the transactions. The former employee claimed that despite being informed of the purported compliance violations, Block failed to implement corrective measures for its processes.
They stated, “From the ground up, everything in the compliance section was flawed,”
“It is led by people who should not be in charge of a regulated compliance program.”
NBC News was also informed by a second anonymous source with “direct knowledge” of Block’s internal systems that corroborated the whistleblowers’ claims.
Former Securities and Exchange Commission attorney and whistleblower representative Edward Siedle stated that based on the documents, “Block leadership and the board were aware of compliance breaches in recent years.”
A representative of Block informed NBC News that the organization maintained a comprehensive and accountable compliance program that was consistently modified to address “evolving sanctions regulatory environments and emerging threats.”
The purported investigation into Block, Inc. coincides with an upsurge of legal proceedings against cryptocurrency companies in the United States.
On April 30, Changpeng Zhao, the founder of Binance, received a four-month prison sentence after his guilty plea for neglecting to uphold a legally compliant anti-money laundering program at the cryptocurrency exchange.
The co-founders of Samourai Wallet, a Bitcoin wallet and cryptocurrency mixer, were apprehended on allegations of money laundering on April 24. Later, the court heard their not-guilty pleas, and they were released on a $1 million bond.
Consensys, a developer of Ethereum, initiated legal proceedings against the SEC on April 25. In the suit, the company accused the regulator of orchestrating a campaign to “seize control over the future of cryptocurrency” through enforcement actions designed to classify Ether ETH as a security.
Consensys disclosed that it had obtained a Wells notice from the SEC on April 10, a notification that frequently precedes enforcement proceedings.
