Block (XYZ) Stock Slides After $45 Million Settlement Over Cash App Fraud Claims

TLDR

• Block has agreed to pay $45 million to settle fraud protection claims from 46 U.S. states
• Regulators say Cash App misled users by marketing itself as having bank-like security protections
• States allege Block responded to rising fraud by increasing marketing rather than improving protections
• As part of the deal, Block must offer 24-hour customer support with live phone agents available at least 13.5 hours daily
• Block stock fell roughly 1.5% on the day; the company denies wrongdoing

Block Inc. has agreed to pay $45 million to settle claims from 46 U.S. states that Cash App failed to protect users from fraud. Block stock (XYZ) was down roughly 1.5% on the news.

Block, Inc., XYZ

The settlement follows an investigation by state attorneys general who found that Cash App was marketed as offering protections similar to a traditional bank, when in reality those protections weren’t in place.

Regulators said Cash App lacked a consistent fraud detection system and had no working customer hotline for reporting scams. When users got locked out, many turned to fake support numbers run by scammers.

The states also highlighted that Cash App accounts could be created without a Social Security number or date of birth, and users could open unlimited accounts — conditions that regulators say enabled fraud.

Attorneys general said Block knew fraud was climbing but responded by expanding marketing rather than tightening protections. The investigation found Block also targeted unbanked and underbanked users, for whom Cash App was often their primary financial account.

One specific promotion called “Cash App Friday” came under fire. Users were encouraged to post their unique app identifier on social media to win prizes. Fraudsters then contacted those users, claimed they had won, and tricked them into handing over login credentials.

Regulators allege Block was aware of these scams but kept the promotion running and trained staff to expect calls from defrauded customers.

What Block Must Now Do

Under the settlement terms, Block is required to overhaul its customer support and fraud protections. That includes offering 24-hour support with live phone agents available for at least 13.5 hours each day.

Block must also stop making claims about Cash App’s safety that it cannot back up.

Washington State Adds Another Hit

Separately, Washington State Attorney General Nick Brown announced a $20 million settlement with Block related to fraudulent unemployment insurance payments during the COVID-19 pandemic.

Brown’s office said that over a five-month period in 2020, Cash App processed at least $22 million in unemployment benefits fraudulently obtained using stolen personal information of Washington residents. Block denied wrongdoing in that case too.

This isn’t the first time Block has been here. Last year, the company agreed to pay up to $120 million — including $40 million to New York — to settle separate state claims that Cash App had not done enough to prevent money laundering.

In a statement, Block called the multistate settlement “a previously disclosed legacy matter that primarily relates to historical aspects of our business” and said Cash App has made investments in consumer protection and compliance.

Every U.S. state is part of the current settlement except Hawaii, Missouri, South Carolina, and Wyoming.

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