Block Inc. Fined $40 Million by NYDFS for Compliance Failures
Block Inc., the digital payments company co-founded by Twitter (now X) founder Jack Dorsey, has been fined $40 million by the New York State Department of Financial Services (NYDFS) due to deficiencies in its Cash App regarding cryptocurrency and anti-money laundering (AML) compliance. This marks the second time this year the company has been penalized for similar issues.
Cash App Violates Consumer Protection and Anti-Money Laundering Regulations
According to a report by Bloomberg on April 10, the NYDFS investigation revealed the following issues in risk management within Block’s mobile payment service, Cash App:
- Inadequate monitoring of high-risk Bitcoin transactions
- Significant deficiencies in user identity due diligence
- Excessive delays in identifying and reporting suspicious activities
- Violations of multiple consumer protection regulations in New York State
The regulatory authority emphasized: “These deficiencies not only jeopardize consumers but also pose potential risks to the overall financial system.” Although Block has cooperated with regulators in this matter and stated that the settlement primarily addresses past compliance procedures, the company did not admit to any wrongdoing in the settlement documents. According to the U.S. Securities and Exchange Commission (SEC), Block has been in negotiations with the NYDFS since 2023.
(Block, the fintech company led by Jack Dorsey, is under investigation by federal authorities)
This is already the second time Block has faced penalties this year due to compliance issues. Earlier this year, the company was jointly fined $80 million by multiple state regulators for violations related to its anti-money laundering program. To date, Block has paid over $120 million in fines this year for similar issues, highlighting the challenges the company faces in cryptocurrency compliance.
Cash App Shows Strong Financial Performance in 2024, User Base Continues to Expand
Despite regulatory challenges, Block’s overall performance remained robust at the end of 2024. The company’s revenue grew approximately 4.5% year-over-year to $6.03 billion, with earnings per share soaring by 51% to $0.71. The total transaction volume from merchants also increased by 10%, reaching $61.95 billion.
However, even with strong revenues, Block (XYZ) remains vulnerable to concerns about the overall economic downturn. Google Finance data shows its stock price has fallen to $52.90 year-to-date, a decline of 39%. Nevertheless, Cash App, as its main growth driver, recorded a gross profit of $1.38 billion in Q4 2024, with monthly active users exceeding 57 million as of early 2024.
Cash App has supported Bitcoin purchases since 2018 and integrated the cryptocurrency tax software TaxBit in 2023 to help users simplify their tax filing processes, demonstrating that despite facing regulatory pressures, Block continues to expand its presence in the cryptocurrency market.
Risk Warning
Investing in cryptocurrency carries a high level of risk, and its prices can be highly volatile, potentially resulting in the loss of your entire principal. Please assess risks carefully.