Block to pay $764 million to settle DOJ investigation over compliance issues
Jack Dorsey's payments company Block has reached a settlement with the U.S. Justice Department, agreeing to pay $764 million to resolve an investigation into its anti-money laundering practices. This proposed settlement comes after an inquiry that began in 2023, triggered by allegations regarding Block's compliance controls following a report from a short seller. The settlement is higher than the $566 million profit Block reported for the third quarter.
The agreement includes a gross monetary component of around $964 million, which was reduced to $764 million after accounting for previous regulatory settlements. Block has already reserved this amount, as indicated in a recent SEC filing. The investigation uncovered serious gaps in Block's compliance systems, including a big backlog of suspicious transaction alerts.
In conjunction with these compliance issues, Block's earnings from bitcoin trading have a lot decreased. The company reported a 50% drop in bitcoin ecosystem gross profit, down to $52 million in the third quarter compared to $104 million a year prior. Despite this, Block's business remains strong, with a 22% increase in total gross profit, driven by growth in its lending and payments segments.
This situation is relevant for traders as it reflects ongoing regulatory scrutiny in the crypto industry, which may impact compliance practices and operational costs for firms involved in cryptocurrency trading.
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