Block Inc. negotiating settlement with NYDFS over alleged compliance deficiencies

Block Inc. is reportedly in talks with New York regulators to settle concerns over its Bitcoin and compliance programs.

In its latest Form 10-K filing with the United States Securities and Exchange Commission, the Jack Dorsey-founded company said it is “continuing negotiations” with the New York State Department of Financial Services over “aspects of its Bank Secrecy Act/Anti-Money Laundering and Bitcoin programs.”

Current negotiations would determine whether the matter could be resolved on “acceptable terms,” the filing stated.

Block has been embroiled in multiple regulatory and legal challenges, including investigations into its compliance framework and tax disputes, according to the filing. It added that between January 2021 and March 2023, regulators from multiple U.S. states examined Block’s AML program and flagged alleged deficiencies related to Bank Secrecy Act compliance.

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

The NYDFS, however, was not part of this settlement. Instead, the agency presented Block with proposed settlement terms in January, according to the filing. While Block has set aside an estimated liability for this matter, it stated that the amount is not material to its financial statements.

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

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.

Additionally, Block is cooperating with inquiries from the SEC and Department of Justice, which were launched 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 plans to realign 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.