Block Inc., owner of Cash App, agreed Wednesday to pay $45 million to settle allegations from regulators in nearly every U.S. state after prosecutors said the company failed to adequately protect customers from fraud and misled users about the app's security. The New York Attorney General's Office stated that Jack Dorsey-led Block marketed Cash App as offering protections comparable to those of a traditional bank, leading customers to believe their funds were safeguarded in the same way, while regulators also alleged the company lacked a consistent fraud detection system and failed to provide a functioning customer hotline for reporting scams. The settlement addresses claims that Block prioritized profits over user protection despite knowing fraud was rising on the platform.
Regulators Allege Block Targeted Unbanked Users and Enabled Fraud Through Promotions
Attorney General Letitia James stated in the announcement that "New Yorkers were promised that Cash App was a safe and secure platform to send money, but in reality, the app exposed them to rampant fraud." Attorneys general said Block knew that fraud was rising, but didn't warn users and instead pivoted to marketing. They also allege that Block targeted unbanked and underbanked people, where in some cases Cash App was used as their main financial account.
The states criticized Block's promotion on social media called 'Cash App Friday,' which allowed users to win prizes if they posted their unique app identifier. According to the statement, "Fraudsters would then contact those users, tell them they had won, and trick them into handing over their login information." The investigation found that Block was aware of these scams but kept running the promotion, training staff to expect defrauded customers to contact them.
Settlement Requires Block to Maintain 24/7 Customer Support and Stop Safety Claims
As part of the settlement, Block must maintain customer support services to resolve fraud complaints and other issues, as well as offer live support 24 hours a day and to stop making claims about Cash App's purported safety. The company denies wrongdoing, according to the consent judgment.
In an emailed statement, a Block spokesperson said the agreement "resolves a previously disclosed legacy matter that primarily relates to historical aspects of our business." The spokesperson added that "Cash App has made significant investments in consumer protection, customer service, and compliance in order to safeguard and serve the tens of millions of Americans who rely on Cash App to meet their banking and credit needs."
Block Shares Fall 1.5% Following Settlement Announcement
Shares of Block (Nasdaq: XYZ) were down roughly 1.5% on the day according to The Block's crypto equities data.
FAQ
What did Block Inc. agree to pay in the settlement with U.S. state regulators?
Block Inc. agreed to pay $45 million to settle allegations brought by regulators in nearly every U.S. state after prosecutors said the company failed to adequately protect customers from fraud and misled users about Cash App's security.
Why did regulators allege Block failed to protect Cash App users?
Regulators alleged Block marketed Cash App as offering protections comparable to those of a traditional bank while lacking a consistent fraud detection system and failing to provide a functioning customer hotline for reporting scams. Attorneys general also said Block knew fraud was rising but didn't warn users and instead pivoted to marketing.
What must Block do under the settlement terms?
Under the settlement, Block must maintain customer support services to resolve fraud complaints and other issues, offer live support 24 hours a day, and stop making claims about Cash App's purported safety.
