Block Inc. in talks for settlement with NYDFS over alleged regulatory lapses

Block Inc., the company established by Jack Dorsey, is allegedly engaged in discussions with New York regulators to address issues regarding its Bitcoin and compliance programs.

According to its most recent Form 10-K filing with the United States Securities and Exchange Commission, Block is "continuing negotiations" with the New York State Department of Financial Services regarding "aspects of its Bank Secrecy Act/Anti-Money Laundering and Bitcoin programs."

The ongoing negotiations will determine if the issue can be resolved on "acceptable terms," as stated in the filing.

Block has faced numerous regulatory and legal challenges, including investigations into its compliance framework and tax disputes, according to the filing. It also mentioned that between January 2021 and March 2023, regulators from various U.S. states examined Block's AML program and identified alleged deficiencies related to Bank Secrecy Act compliance.

In January, Block reached settlements with several state money transmission regulators and paid $80 million in penalties. As part of the settlement, it appointed an independent consultant to review its AML program and ensure corrective measures were implemented.

However, the NYDFS did not participate in this settlement. Instead, the agency presented Block with proposed settlement terms in January, according to the filing. Although Block has set aside an estimated liability for this matter, it stated that the amount is not significant to its financial statements.

The filing did not reveal details of the settlement terms, and Block has not admitted any wrongdoing.

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Block is also dealing with a tax dispute in San Francisco, where local authorities claim it owes additional taxes on Bitcoin-related revenue earned between 2020 and 2022. It reportedly paid $71.4 million to challenge the assessment but said it strongly disputes the claim and intends to seek a refund.

Moreover, Block is cooperating with inquiries from the SEC and Department of Justice, which were initiated following a March 2023 report questioning its compliance and risk practices.

It added that it is "unable to predict the likely outcome" of these investigations and "cannot provide any assurance" that they won't have a "material adverse effect" on its business operations.

Block's latest disclosure comes as the company prepares to shift its focus toward the Bitcoin mining sector in 2025. In a November shareholder letter, it announced plans to scale down its music streaming service, TIDAL, and wind down its decentralized web project, TBD, as it expands into mining hardware through the Proto initiative.

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