Oakland, California-based Block is being investigated by prosecutors from the Department of Justice’s Southern District of New York, according to the NBC news report on Wednesday. 

A former employee, armed with internal company documents, has been working with the prosecutors to detail issues such as Block allegedly processing Bitcoin transactions for terrorist groups, and the company’s Square unit processing transactions for countries subject to U.S. economic sanctions. 

The company is also facing potential federal investigations concerning its compliance program from the Financial Crimes Enforcement Network, an agency in the U.S. Treasury Department, as well as with the Securities and Exchange Commission and the Commodity Futures Trading Commission, based on complaints from two whistleblowers, according to a February NBC report. 

The Consumer Financial Protection Bureau notified Block in February that it may take “legal action” against the company, based on customer service concerns related to the company’s peer-to-peer payment unit Cash App.

Wall Street analysts who follow the publicly-traded company seemed largely unconcerned about the legal concerns facing the payments company. During the earnings call, none of the questions touched on the NBC report, the government investigations or legal concerns.

“We imagine (Block’s) procedures would have tightened up since” earlier reports regarding similar allegations, Baird Senior Research Analyst David Koning wrote in a Wednesday note to clients.

Block’s first-quarter net income climbed to $472 million, jumping more than five-fold from $98 million for the year-earlier quarter, according to the company’s shareholder letter. Net revenue for the quarter rose 19% to $5.96 billion. Excluding bitcoin revenue, revenue increased 14% to $3.23 billion.

Block did not immediately respond to questions about Dorsey’s remarks, or about its compliance program.

By James Pothen on May 3, 2024
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