NEW YORK : Block, the technology and financial services company led by Twitter co-founder Jack Dorsey, won the dismissal on Tuesday of litigation claiming it misled shareholders in connection with a large data breach at its Cash App mobile payment service.
U.S. District Judge Margaret Garnett in Manhattan found no proof Block intended to defraud shareholders in connection with the December 10, 2021 breach, where a former employee downloaded personal information of about 8.2 million Cash App users.
Shareholders in the proposed class action said Block inflated its share price by failing to disclose its inadequate data security prior to the breach, and then waiting nearly four months before disclosing the breach on April 4, 2022.
They also accused the Oakland, California-based company of misleading former shareholders of Afterpay about its data security, in order to complete its $29 billion buyout of that Australian “buy now, pay later” company in January 2022.
In a 42-page decision, Garnett said reasonable investors could not view general statements that Block made in regulatory filings and on its website about potential risks as assertions that its data security was sound.
She also said shareholders failed to show any “unique” connection between alleged misstatements and the Afterpay buyout, or that Block executives benefited in some concrete way, to establish a motive to defraud.
Lawyers for the shareholders did not immediately respond to requests for comment after market hours. Block and its lawyers did not immediately respond to similar requests.
In January, Block agreed to pay $80 million to settle accusations by 48 state financial regulators that Cash App lacked sufficient anti-money laundering policies. It reached a similar $40 million settlement with New York in April.
Cash App had $283 billion of inflows in 2024, and 57 million monthly users at year-end, a regulatory filing showed.
The case is In re Block Inc Securities Litigation, U.S. District Court, Southern District of New York, No. 22-08636.
