Cash App
O’Neill v. Dorsey
Date: Oct. 10, 2025
Issue: Whether Block Inc.’s directors and executives violated the Securities Exchange Act by using Cash App’s “frictionless” sign-up system to inflate user metrics while failing to implement adequate compliance and fraud-prevention controls.
Case Summary: Shareholder Michael O’Neill sued Block Inc.’s executives and directors alleging Cash App’s frictionless sign-up system enabled widespread fraud, compliance failures and inflated user metrics.
O’Neill alleged Block designed Cash App around a “frictionless onboarding” model that intentionally required minimal information to attract new users. To open an account, customers only needed to download the app and enter a phone number or email address with a zip code — without providing key identifiers like a bank account or Social Security number.
According to O’Neill, this simple process made Cash App easy to use and helped it grow quickly, but it also created major risks of fraudulent account creation. Although tools such as biometric verification, fraud detection, adaptive risk scoring, and stronger monitoring could have reduced those risks, O’Neill claimed Block chose not to adopt them. Instead, Block allegedly prioritized rapid user growth, using its simplified sign-up process to boost Cash App’s monthly active users from 17.6 million in 2019 to more than 53 million by 2023.
On March 23, 2023, Hindenburg Research accused Block of inflating user metrics and enabling fraud through Cash App’s “frictionless onboarding” system, which lacked effective identity verification. Nearly a year later, NBC News reported that two whistleblowers filed complaints with the Treasury Department’s Financial Crimes Enforcement Network, claiming Block had “no effective procedure” to identify Cash App customers. On May 1, 2024, NBC reported that federal prosecutors were investigating long-term compliance lapses involving company leaders. After the reports surfaced, Block’s stock price dropped sharply as the market corrected its previously inflated value. The company’s common stock fell from $73 per share at the close of trading on April 30, 2024, to $66.84 per share at the close on May 1, 2024 — an 8% decline on unusually high trading volume exceeding 22 million shares.
On Jan. 16, 2025, CFPB found that Block violated consumer protection laws by failing to prevent fraud and resolve unauthorized transactions. Three months later, the New York Department of Financial Services fined Block for weak verification and monitoring controls. Superintendent Adrienne A. Harris warned that Block’s rapid growth, without compliance safeguards, posed serious risks. O’Neill alleged these failures, and misleading statements cost the company over $295 million and severely damaged its reputation.
In his complaint, O’Neill alleged that Block’s directors and senior executives violated Sections 14(a), 10(b), and 29(b) of the Securities Exchange Act and related Securities and Exchange Commission rules by misleading shareholders and engaging in fraudulent conduct. O’Neill claimed Block’s executives violated Section 14(a) by issuing false proxy statements that overstated the board’s oversight and risk management while concealing widespread compliance failures and illegal activity on Cash App. O’Neill also asserted the executives caused Block to repurchase millions of shares at artificially inflated prices, violating Rule 10b-5. Finally, O’Neill asserted the executives violated Section 29(b) by engaging in unlawful conduct while performing their employment and compensation contracts, rendering those agreements voidable. O’Neill emphasized due to the executives’ alleged misconduct, Block allegedly suffered steep stock declines and regulatory penalties.
O’Neill also alleged Block’s executives breached their fiduciary duties of loyalty, good faith, and due care by failing to maintain adequate oversight, compliance, and risk management systems. O’Neill claimed the executives ignored or allowed unlawful conduct to persist on Cash App and violated their duty to ensure Block operated lawfully and ethically, while the officers knowingly relaxed compliance measures to drive user growth, leading to widespread fraud and criminal activity. O’Neill also claimed several insiders breached their fiduciary duties by selling Block stock while possessing material nonpublic information about these compliance failures, profiting from the company’s inflated share price.
O’Neill seeks an order declaring he may maintain this action on behalf of Block as an adequate representative of the company and that the individual defendants breached their fiduciary duties and violated Sections 10(b), 14(a), and 29(b) of the Exchange Act. O’Neill requests damages for the harm Block suffered, holding the executives jointly and severally liable with pre- and post-judgment interest. He also asks the court to impose a constructive trust and order disgorgement of profits gained or losses avoided through insider trading. Finally, O’Neill seeks an order directing Block and its executives to strengthen governance and compliance systems to prevent future misconduct.
Bottom Line: O’Neill claims Block Inc.’s leaders violated the Securities Exchange Act and their fiduciary duties by using Cash App’s “frictionless” sign-up system to inflate user metrics while ignoring fraud and compliance risks, misleading investors, and causing major financial and reputational harm.
Document: Complaint
