Shares of Block (SQ) tumbled more than 6% Wednesday after NBC News reported that federal prosecutors are examining financial transactions at the company.
The Cash App and Square (NYSE:SQ) owner was launched by Twitter co-founder Jack Dorsey. NBC says, citing people with direct knowledge of the matter, that federal prosecutors are speaking with a former employee of the company regarding alleged widespread and yearslong compliance lapses at Square and Cash App.
The lapses are said to include inadequate customer information collection, processing transactions from sanctioned countries, and processing cryptocurrency transactions for terrorist groups. NBC says the former employee claims that many of these transactions, involving credit cards, dollar transfers, and Bitcoin, were not reported to the government as required and that Block did not correct its processes when alerted to the breaches.
The documents provided to NBC News by the former employee reportedly highlight transactions involving entities in countries under U.S. sanctions, such as Cuba, Iran, Russia, and Venezuela, as recent as last year. The former employee described systemic flaws within Block's compliance section and criticized the leadership's handling of regulatory matters.
Just after the open at 09:33 am ET on Wednesday, Block shares are down 5.7% at $68.87 after opening the session at $67.91.