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Block Wins Dismissal of Shareholder Lawsuit Over 2021 Cash App Breach

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Block (XYZ.N), the fintech company led by Jack Dorsey, has defeated a shareholder lawsuit tied to a 2021 Cash App data breach that exposed information from about 8.2 million users.

The Case

  • Shareholders accused Block of:

    • Inflating its stock price by failing to disclose weak data security before the breach.

    • Delaying disclosure until April 2022, nearly four months after the incident.

    • Misleading Afterpay shareholders ahead of its $29 billion acquisition of the BNPL firm in January 2022.

Court’s Ruling

  • U.S. District Judge Margaret Garnett in Manhattan dismissed the case.

  • She ruled there was no evidence Block intended to defraud investors.

  • General statements about data security risks were not guarantees of system safety.

  • Shareholders also failed to prove:

    • A unique link between alleged misstatements and the Afterpay deal.

    • That Block executives had a specific motive or benefit from the alleged omissions.

Context

  • Block has faced regulatory pressure over Cash App:

    • $80M settlement with 48 U.S. state regulators (Jan 2024).

    • $40M settlement with New York (Apr 2024).

  • Despite these issues, Cash App processed $283B in inflows in 2024 and had 57M monthly active users by year-end.

What’s Next

  • The case (In re Block Inc Securities Litigation, No. 22-08636) is now dismissed, though investors could still pursue an appeal.

  • For Block, the ruling removes a major legal overhang as it continues to scale Cash App and integrate Afterpay.

US CFPB Fines Cash App-Parent Block Over Insufficient Fraud Protection

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The U.S. Consumer Financial Protection Bureau (CFPB) has imposed a penalty on Block, the parent company of the popular mobile payment service Cash App, over allegations of inadequate fraud protection measures. According to the CFPB, Block directed Cash App users who experienced fraud-related losses to contact their banks for transaction reversals, but these claims were subsequently denied. The regulator further accused Block of using various tactics to prevent users from seeking help, ultimately reducing the company’s own costs.

Cash App, one of the largest peer-to-peer payment platforms in the U.S., allows users to send and receive money, accept direct deposits, and make purchases using a prepaid card. CFPB Director Rohit Chopra criticized Cash App for failing to fulfill its responsibilities, burdening local banks with problems caused by the company’s actions.

Block, led by Twitter co-founder Jack Dorsey, responded by stating that the issues cited were historical and no longer reflect the current Cash App experience. The company emphasized that it disagreed with the CFPB’s characterizations but chose to settle the matter to move forward and prioritize its customers and business.

The enforcement order includes a $55 million penalty to be paid into the CFPB’s victim relief fund, along with up to $120 million in compensation. Block has also been required to establish a 24-hour live customer service for investigating unauthorized transactions and issuing refunds.

Additionally, the company agreed to pay $80 million to settle with 48 state financial regulators. This penalty comes amid other actions taken by the CFPB against financial services, including a lawsuit against Zelle and major banks last month.