Block, Inc.
Case Overview
55 Days Left to Seek Lead Plaintiff
| Lead Plaintiff Deadline: | Lead Plaintiff Deadline: 03/18/2025 |
| Status: | Status: Investigating |
| Company Name: | Company Name: Block, Inc. |
| Court: | Court: Northern District of California |
| Case Number: | Case Number: 3:25cv00642 |
| Class Period: | Class Period: 02/26/2020 - 04/30/2024 |
| Ticker: | Ticker: SQ |
| Related Attorneys: | Lead Attorneys: Thomas W. Elrod |
| Related Practices: | Related Practices: Securities |
The law firm of Kirby McInerney LLP announces that a class action lawsuit has been filed in the U.S. District Court for the Northern District of California on behalf of those who acquired Block, Inc. (“Block” or the “Company”) (NYSE:SQ) securities during the period from February 26, 2020, through April 30, 2024 (“the Class Period”). Investors have until March 18, 2025, to apply to the Court to be appointed as lead plaintiff in the lawsuit.
On March 23, 2023, Hindenburg Research published an exposé about Block titled: “Block: How Inflated User Metrics and ‘Frictionless’ Fraud Facilitation Enabled Insiders to Cash Out Over $1 Billion.”. The report alleged that Block had wildly overstated its genuine user counts and had understated its customer acquisition costs, with former employees claiming that 40%-75% of accounts they reviewed were faked, involved in fraud, or were additional accounts tied to a single individual. Additionally, the report accused Block of adopting a “Wild West” approach to compliance, which made it easy for bad actors to mass create accounts for identity fraud and other scams, then extract stolen funds quickly. For example, during the COVID-19 pandemic, Block had obvious compliance lapse that made fraud easy, such as permitting single accounts to receive unemployment payments on behalf of multiple from various states and ineffective address verification. The report concluded that Block had misled investors on key metrics and embraced predatory offerings and compliance worst-practices to fuel growth and profit from facilitation of fraud against consumers and the government. On this news, the price of Block shares fell $10.77 per share, or approximately 14.82%, from $72.65 per share on March 22, 2023, to close at $61.88 on March 23, 2023.
Then, on August 3, 2023, Block disclosed that the U.S. Securities and Exchange Commission and the U.S. Department of Justice were investigation the allegations against Block and its employees contained in the Hindenburg Research report. On this news, the price of Block shares fell $10.03 per share, or approximately 13.63%, from $73.55 per share on August 3, 2023, to close at $63.52 on August 4, 2023.
Thereafter, on February 16, 2024, NBC News reported that federal regulators were probing allegations by two whistleblowers that Block’s app, Cash App, performed inadequate due diligence on its users including “no effective procedure to establish their identity” opening the door to potential money laundering, terrorism financing, and other illegal and illicit activities. On this news, the price of Block shares fell $3.84, from $69.48 per share on February 15, 2024, to close at $65.64 on February 16, 2024.
Finally, on May 1, 2024, NBC News reported that federal regulators were investigating Block due to allegations by a former employee that Block had engaged in widespread and years-long compliance lapses at its two main units, Square and Cash App. Reportedly, the employee had provided prosecutors with internal Block documents demonstrating that Block had failed to conduct basic due diligence n its customers, that Square had processed thousands of transactions involving countries subject to economic sanctions, and that Block had processed multiple cryptocurrency transactions for terrorist groups. On this news, the price of Block shares declined by $6.16 per share, from $73.00 per share on April 30, 2024, to close at $66.84 on May 1, 2024.
The complaint alleges that defendants, throughout the Class Period, made false and/or misleading statements and/or failed to disclose that: (1) Block had engaged in widespread and years-long compliance lapses at Square and Cash App, including by failing to conduct basic due diligence regarding its customers’ identities or the nature of customer transactions so as to prevent the platforms from being used for illegal or illicit activities; (2) Block had effectively created a haven for widespread illegal and illicit activities on its Square and Cash App platforms by imposing minimal obligations on customers seeking to open accounts, transact, and deposit or withdraw funds; encouraging the use of bitcoin; and pressuring Block’s banking partners to forgo ordinary know your customer due diligence activities; (3) thousands of transactions on Square and Cash App were made in connection with a wide variety of illegal and illicit activities, including, inter alia, money laundering, child sexual abuse, sex trafficking, drug trafficking, terrorism financing, contract killings, and illicit payments to entities and persons subject to economic sanctions; (4) Block allowed its customers to withdraw funds even after the accounts had been flagged for potentially illegal or illicit activities; (5) Block customers could open up multiple accounts using fake identities in order to engage in illegal or illicit activities; (6) Block’s senior leadership and the Board of Directors had failed to correct identified compliance deficiencies despite numerous red flags, internal employee reports of deficiencies, and customer complaints; and (7) Block’s Cash App user metrics had been artificially inflated through the use of fake accounts and the ability of criminals and other bad actors to open multiple accounts.
On March 23, 2023, Hindenburg Research published an exposé about Block titled: “Block: How Inflated User Metrics and ‘Frictionless’ Fraud Facilitation Enabled Insiders to Cash Out Over $1 Billion.”. The report alleged that Block had wildly overstated its genuine user counts and had understated its customer acquisition costs, with former employees claiming that 40%-75% of accounts they reviewed were faked, involved in fraud, or were additional accounts tied to a single individual. Additionally, the report accused Block of adopting a “Wild West” approach to compliance, which made it easy for bad actors to mass create accounts for identity fraud and other scams, then extract stolen funds quickly. For example, during the COVID-19 pandemic, Block had obvious compliance lapse that made fraud easy, such as permitting single accounts to receive unemployment payments on behalf of multiple from various states and ineffective address verification. The report concluded that Block had misled investors on key metrics and embraced predatory offerings and compliance worst-practices to fuel growth and profit from facilitation of fraud against consumers and the government. On this news, the price of Block shares fell $10.77 per share, or approximately 14.82%, from $72.65 per share on March 22, 2023, to close at $61.88 on March 23, 2023.
Then, on August 3, 2023, Block disclosed that the U.S. Securities and Exchange Commission and the U.S. Department of Justice were investigation the allegations against Block and its employees contained in the Hindenburg Research report. On this news, the price of Block shares fell $10.03 per share, or approximately 13.63%, from $73.55 per share on August 3, 2023, to close at $63.52 on August 4, 2023.
Thereafter, on February 16, 2024, NBC News reported that federal regulators were probing allegations by two whistleblowers that Block’s app, Cash App, performed inadequate due diligence on its users including “no effective procedure to establish their identity” opening the door to potential money laundering, terrorism financing, and other illegal and illicit activities. On this news, the price of Block shares fell $3.84, from $69.48 per share on February 15, 2024, to close at $65.64 on February 16, 2024.
Finally, on May 1, 2024, NBC News reported that federal regulators were investigating Block due to allegations by a former employee that Block had engaged in widespread and years-long compliance lapses at its two main units, Square and Cash App. Reportedly, the employee had provided prosecutors with internal Block documents demonstrating that Block had failed to conduct basic due diligence n its customers, that Square had processed thousands of transactions involving countries subject to economic sanctions, and that Block had processed multiple cryptocurrency transactions for terrorist groups. On this news, the price of Block shares declined by $6.16 per share, from $73.00 per share on April 30, 2024, to close at $66.84 on May 1, 2024.
The complaint alleges that defendants, throughout the Class Period, made false and/or misleading statements and/or failed to disclose that: (1) Block had engaged in widespread and years-long compliance lapses at Square and Cash App, including by failing to conduct basic due diligence regarding its customers’ identities or the nature of customer transactions so as to prevent the platforms from being used for illegal or illicit activities; (2) Block had effectively created a haven for widespread illegal and illicit activities on its Square and Cash App platforms by imposing minimal obligations on customers seeking to open accounts, transact, and deposit or withdraw funds; encouraging the use of bitcoin; and pressuring Block’s banking partners to forgo ordinary know your customer due diligence activities; (3) thousands of transactions on Square and Cash App were made in connection with a wide variety of illegal and illicit activities, including, inter alia, money laundering, child sexual abuse, sex trafficking, drug trafficking, terrorism financing, contract killings, and illicit payments to entities and persons subject to economic sanctions; (4) Block allowed its customers to withdraw funds even after the accounts had been flagged for potentially illegal or illicit activities; (5) Block customers could open up multiple accounts using fake identities in order to engage in illegal or illicit activities; (6) Block’s senior leadership and the Board of Directors had failed to correct identified compliance deficiencies despite numerous red flags, internal employee reports of deficiencies, and customer complaints; and (7) Block’s Cash App user metrics had been artificially inflated through the use of fake accounts and the ability of criminals and other bad actors to open multiple accounts.