Block litigation
In Re Block Inc.
Gonsalves v. Block Inc.
Date: Jan. 6, 2026
Issue: Whether Block Inc. made materially misleading disclosures in violation of federal securities laws and whether its directors and officers failed to properly oversee compliance risks tied to Cash App.
Case Summary: Judge Noel Wise of the Northern District of California refused to dismiss two lawsuits against Block Inc., alleging its executives and board members failed to properly oversee its compliance program.
In January 2025, NYC Funds, a group of New York retirement pension funds (Plaintiffs), sued Block Inc. and two of its executives, Jack Dorsey and Amrita Ahuja, in a putative securities-fraud class action. Plaintiffs claimed that Block, the parent company of Cash App, made false and misleading statements about Cash App’s compliance program that hid regulatory weaknesses and risks. Plaintiffs also alleged these statements triggered enforcement actions and contributed to an 84% drop in Block’s stock price. Plaintiffs claimed Block and its executives violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, which bar material misstatements, omissions, and deceptive practices in securities transactions. On July 30, 2025, Block moved to dismiss.
In February 2025, Block shareholders separately sued several current and former directors and officers of Block (The Individual Defendants), along with the company itself, alleging failures in oversight of compliance risks tied to Cash App. The shareholders alleged Block pursued rapid user growth through “frictionless onboarding” that required minimal customer information and enabled fraud and other criminal activity. The shareholders further claimed the board and its Audit and Risk Committee received repeated warnings about rising suspicious activity reports and growing compliance backlogs yet failed to expand the company’s compliance program as Cash App’s growth continued.
On July 28, 2025, Block moved to dismiss the complaint for forum non conveniens. This common-law doctrine permits a court to dismiss a case, even when jurisdiction and venue are proper, if a more convenient forum exists. The Individual Defendants separately moved to dismiss for failure to plead demand futility and failure to state a claim.
Class Action Suit
Judge Wise rejected Block’s arguments that the complaint failed to plead falsity, scienter, and loss causation under Section 10(b) of the Exchange Act and SEC Rule 10b-5. The court found that Plaintiffs adequately alleged that Block made misleading statements and omissions about the strength of its compliance program and the accuracy of Cash App user metrics. According to the court, the complaint described a clear gap between Block’s public assurances and its internal practices, including under-resourced compliance systems, growing backlogs of unresolved alerts, and lax onboarding that allowed fraudulent accounts to inflate reported user growth. The court also concluded these alleged misstatements were material to investors and plausibly linked to stock price declines after corrective disclosures.
The court also determined that Plaintiffs sufficiently alleged scienter by showing that senior executives, including Jack Dorsey and Amrita Ahuja, had access to internal reports and warnings about compliance failures and inflated metrics but continued to promote growth and user figures publicly. Taken together, these allegations supported a strong inference that defendants acted knowingly or with deliberate recklessness. The court also concluded Plaintiffs adequately alleged loss causation by tying the disclosure of the alleged misconduct to a sharp drop in Block’s stock price. Because Plaintiffs stated a viable primary securities-fraud claim, the court allowed the Section 20(a) control-person claims against Dorsey and Ahuja to proceed and denied the motions to dismiss in full.
Shareholders Suit
Judge Wise rejected Block’s argument that the forum-selection clause in its amended and restated bylaws required dismissal of the case for forum non conveniens in favor of the Delaware Court of Chancery. Block argued that its amended and restated bylaws governed the shareholders’ action and mandated Delaware as the proper forum. But the court held that the clause excludes claims brought under the Exchange Act and that federal courts have exclusive jurisdiction over those claims. Because the shareholders’ Exchange Act claims predominated, the court concluded that the forum-selection clause did not apply and denied Block’s motion to dismiss.
The court also denied the Individual Defendants’ motion to dismiss for failure to plead demand futility and failure to state a claim. The shareholders alleged that the Individual Defendants faced a substantial likelihood of liability for breaching their oversight obligations under Caremark. A Caremark claim is a shareholder derivative action alleging that directors breached their fiduciary duty of loyalty by failing to implement or monitor adequate internal compliance and reporting systems.
The court held that the shareholders adequately alleged particularized facts showing that directors, despite having reporting systems in place, consciously failed to monitor or oversee compliance risks and thus remained uninformed of serious problems. Based on the alleged failure to respond to compliance red flags at Cash App, the court concluded that a majority of the board faced a substantial likelihood of liability, allowing the fiduciary duty, Exchange Act, and insider trading claims to proceed.
Bottom Line: The court allowed the securities-fraud and shareholder derivative cases against Block to proceed, finding that plaintiffs plausibly alleged misleading disclosures and compliance oversight failures at Cash App and rejecting Block’s forum-selection and demand-futility arguments.
Document:
Class Action Order
Shareholders Order
