Block Books $764 Million for DOJ Deal Over Cash App AML Failures

$764 Million Set Aside for a DOJ Deal

Block (XYZ) has accrued $764 million against a planned deferred prosecution agreement with the U.S. Department of Justice, a charge disclosed in its quarterly report posted on Tuesday, Nov. 3. The accrual covers the allegation that the payments company failed to maintain an effective anti-money-laundering program in violation of the Bank Secrecy Act, and the sum exceeds the $566 million net profit Block reported for the third quarter. The gross monetary component is about $964 million, with credits for prior regulatory resolutions bringing the net figure to $764 million, an amount Block says is fully accrued as of Sept. 30. The legal charge arrived alongside results that beat expectations. Third-quarter gross profit came in at $3.24 billion against consensus near $3.1 billion, and net earnings per share reached $1.13 versus the $1.03 figure the market anticipated. Cash App gross profit rose 27% year over year to $2.07 billion and Square added 14% to $1.16 billion. Adjusted operating income reached $923 million, and management lifted the full-year gross profit outlook to $12.626 billion from $12.51 billion, while adjusted diluted earnings-per-share guidance moved to $4.15 from $4.02. Block stock climbed more than 14% to $86.98 at the time of reporting.

A Probe That Began With a Short Seller

The Justice Department's inquiry traces to March 2023, when Hindenburg Research alleged that Cash App inflated user counts with duplicate and fraudulent accounts and that weak identity checks left the platform open to scams and laundering. Block called the report inaccurate and misleading. The U.S. Securities and Exchange Commission (SEC) opened its own inquiry and closed it in March 2026 without an enforcement recommendation, leaving the DOJ case as the remaining exposure. State regulators moved first. In April 2025 the New York Department of Financial Services fined Block $40 million after finding a suspicious-activity alert backlog that grew from roughly 18,000 in 2018 to more than 169,000 by 2020. A multistate settlement in January 2025 added $80 million, and those payments form part of the $200 million credit against the DOJ figure. The accrual math has shifted quickly: Block had set aside $526 million at the end of June, when its filing said the DOJ's assessment did not reflect its view of an appropriate measure of loss or potential liability. That language is absent from the 10-Q filed Nov. 3, which books the net $764 million. Final terms are unsigned, court approval is required, and the filing warns total costs could exceed the accrual. Block also disputes the basis and methodology of the government's assessment.

Bitcoin Gross Profit Halves to $52 Million

Bitcoin was the outlier in an otherwise strong quarter. Gross profit from the bitcoin ecosystem fell 50% to $52 million from $104 million a year earlier, while bitcoin revenue dropped 11% to about $1.8 billion. The company's shareholder letter attributes the decline primarily to its own decision to cut fees on certain bitcoin transactions inside Cash App. A lower average bitcoin price outweighed higher trading volume, and the category's margin compressed to about 2.9 cents of gross profit per revenue dollar from 5.1 cents a year earlier. The squeeze is deliberate. Block wants bitcoin to function as a payment rail rather than a trading product: it auto-enabled roughly 1 million Square merchants for Lightning payments in May, waived processing fees on bitcoin through 2026, and launched a national advertising campaign in October built on spending the asset rather than holding it. The price sliding from about $114,000 to $70,000 over the year weighed on gross-booked revenue from bitcoin sales to customers. Block still holds 28,355 BTC across treasury and customer balances, including roughly 9,000 in the corporate treasury, and continues to direct 10% of monthly bitcoin gross profit into purchases.

Charter Bid Puts Compliance History in Play

The number to hold onto is the settlement's size relative to earnings: at $764 million net, the DOJ accrual exceeds the quarter's entire $566 million net profit, and it lands while Block pursues an industrial bank charter for a unit it calls Builders Bank, which would offer custody and fiduciary services for bitcoin. Bank regulators weigh compliance history in charter decisions, so the three-year runway cuts both ways: Block avoids a conviction if it meets the agreement's terms, the same deferred prosecution structure Binance accepted in 2023 at a cost of $4.3 billion. The bitcoin margin compression, for its part, is a strategic cost of the payments pivot rather than a demand problem, and full-year guidance still moved higher despite it.