United States federal prosecutors are reportedly probing Jack Dorsey’s fintech company Block, Inc. after a whistleblower surfaced documents alleging ongoing and widespread compliance violations at the firm’s payment arms Square and Cash App.
A former Block employee provided prosecutors from the Southern District of New York with documents allegedly showing that Square and Cash App processed thousands of transactions for users in countries subject to economic sanctions as well as crypto transactions for terrorist groups, NBC News reported on May 1
Roughly 100 pages of the documents were provided to NBC News, which reported many transactions were in small dollar amounts involving entities in countries subject to United States economic sanctions, including Iran, Russia, Cuba, and Venezuela.
The whistleblower said that most of the transactions discussed with prosecutors — which involved credit card, fiat, and Bitcoin (BTC) transactions — were not reported to the government.
Block did not correct its processes when it was alerted to the alleged breaches of compliance, the former employee alleged.
“From the ground up, everything in the compliance section was flawed,” they said.
“It is led by people who should not be in charge of a regulated compliance program.”
A second anonymous source with “direct knowledge” of Block’s internal systems also confirmed the whistleblowers’ allegations to NBC News.
Edward Siedle — a former Securities and Exchange Commission lawyer who represents the whistleblower — said it was his understanding from the documents that compliance breaches were “known to Block leadership and the board in recent years.”
A Block spokesperson told NBC News that the firm maintained a “responsible and extensive” compliance program that was regularly adapted to meet “emerging threats and an evolving sanctions regulatory environment.”
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The reported probe into Block, Inc. comes amid a wider spate of legal action against cryptocurrency firms in the United States.
Binance founder Changpeng Zhao was sentenced to four months in prison on April 30 after earlier pleading guilty to failing to maintain a legally compliant Anti-Money Laundering program at the exchange.
On April 24, the co-founders of crypto mixer and Bitcoin wallet Samourai Wallet were arrested on money laundering charges. The pair later pleaded not guilty in court and were released on a $1 million bond.
On April 25, Ethereum development firm Consensys sued the SEC, alleging the regulator had orchestrated a campaign to “seize control over the future of cryptocurrency” with enforcement actions aimed at deeming Ether (ETH) as a security.
Consensys said it had received a Wells notice from the SEC on April 10, which can often precede an enforcement action.
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