- Jack Dorsey’s fintech firm Block is under investigation.
- Whistleblowers have divulged startling revelations to federal prosecutors.
- Block stands accused of multiple violations, including processing cryptocurrency transactions involving sanctioned entities.
US Federal prosecutors aren’t slowing down in their crackdown on the crypto industry, as they continue to scrutinize both major and upcoming players. After recently targeting KuCoin, one of the world’s largest crypto exchanges, authorities are turning to Twitter founder Jack Dorsey’s Block (formerly Square), probing alleged sanctions violations and more.
Whistleblowers Unveil Block’s Violations
On May 1, NBC News reported, citing sources familiar with the matter, that Federal prosecutors are actively investigating Block’s crypto unit. The publication detailed that authorities were working with the company’s former employees to scrutinize its compliance practices and alleged violations.
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Whistleblowers accused Jack Dorsey’s company of processing crypto transactions linked to sanctioned countries and terrorist organizations. The former employees also asserted that the fintech firm’s alleged lax crypto practices are just one slice of the “widespread and yearslong compliance lapses,” adding that most transactions involving Bitcoin, credit cards, and dollar transfers were not reported to the government as required.
“From the ground up, everything in the compliance section was flawed,” an anonymous Block employee told NBC News, revealing that “thousands” of questionable transactions went unreported to the US Office of Foreign Assets Control, or OFAC, which enforces economic sanctions.
The whistleblowers allegedly provided prosecutors from the Southern District of New York with over 100 pages of what they said were their former company’s internal documents. This included sufficient records of exchanges between Block and sanctioned countries such as Cuba, Iran, Russia, and Venezuela, as recently as last year, implying the fintech firm’s continued involvement despite being aware of the misuse.
In response to the extensive list of allegations, Block firmly denied violating international sanctions, noting that its in-house legal team, outside counsel, and consultants were advising on the issue, adding that it already conducted regular sanctions screenings on all its merchants.
On the Flipside
- Tether implemented a wallet-freezing policy that targeted individuals on the SDN list—resulting in the freezing of hundreds of wallets and recovering losses of over $600,000.
- Binance paid over $4.3 billion in fines for facilitating money laundering and violating international sanctions.
- Verse Payments Lithuania UAB, Block’s European equivalent of Cash App, was ordered by the Financial Market Supervisory Committee of the Bank of Lithuania to address identity verification issues related to existing clients. It later shut down its services, citing “underwhelming” growth.
Why This Matters
The former employees’ allegations against Block are quite serious and could set the stage for a slew of legal troubles for the fintech firm.
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