Block Inc. (XYZ) has agreed in principle to pay $764 million to resolve a U.S. Justice Department investigation into its anti-money-laundering controls — a sum larger than the $566 million in profit the company reported for the third quarter.

The agreement, reached in October and disclosed in a 10-Q filed Nov. 3, would defer for three years a criminal charge that Block failed to maintain an effective anti-money-laundering program under the Bank Secrecy Act, the federal law that requires money services businesses to monitor transactions and report suspicious activity. The gross figure is about $964 million, reduced to $764 million after credits for earlier regulatory settlements. Block has accrued the full amount and said losses above it are “reasonably possible.” The company disputes the basis and methodology of the government's assessment, and the deal still requires final approval before it takes effect.

The settlement overshadowed a quarter in which gross profit rose 22% to $3.24 billion, according to the company release, with Cash App up 27% to $2.07 billion and Square up 14% to $1.16 billion. Bitcoin was the exception. Gross profit from the bitcoin business fell 50% to $52 million from $104 million a year earlier, and bitcoin revenue dropped 11% to $1.8 billion, leaving the bitcoin business at roughly 1.6% of the company's total gross profit.

A Case That Began With a Short Seller

The investigation dates to March 2023, when short seller Hindenburg Research alleged that Cash App inflated user counts with duplicate and fraudulent accounts and that weak identity checks let criminals use the platform for scams and money laundering. Block called the report inaccurate and misleading. The Justice Department and the Securities and Exchange Commission opened inquiries into the compliance practices and related disclosures; the SEC closed its side in March without recommending enforcement.

State regulators moved first. In April 2025, the New York Department of Financial Services fined Block $40 million after finding a backlog of suspicious-activity alerts that grew from about 18,000 in 2018 to more than 169,000 by 2020, and a screening system that did not block bitcoin transfers to wallets linked to terrorism financing until exposure passed 10%. A multistate settlement in January 2025 added $80 million. Those payments account for part of the $200 million credit against the DOJ figure.

The deferred prosecution structure means Block avoids a conviction if it meets the agreement's terms over three years, a path Binance took in 2023 at a cost of $4.3 billion. The charge lands as Block pursues an industrial bank charter for a unit it calls Builders Bank, which would offer custody and fiduciary services for bitcoin under banking supervision. Bank regulators weigh compliance history in charter decisions, and Block's record now includes the state penalties as well as the pending federal resolution.

Bitcoin Profit Decline Was a Strategic Choice

Block said the drop in bitcoin profit came from its decision to cut fees on certain Cash App bitcoin transactions, part of a push to make the asset a payment rail rather than a trading product. The company auto-enabled about 1 million Square merchants for Lightning payments in May, waived processing fees on bitcoin through 2026, and in October launched a national ad campaign built on spending bitcoin rather than holding it. Lightning is a payments protocol built on top of bitcoin, designed to settle transfers quickly at low cost.

Revenue from bitcoin sales to customers, which Block books at gross, fell as the price dropped from about $114,000 to $70,000 over the year. Block, which first added bitcoin to its corporate balance sheet in 2020, held 28,355 BTC across its treasury and customer balances as of the first quarter, including about 9,000 in the corporate treasury, and continues to put 10% of bitcoin gross profit into purchases.

This article first appeared on Bitcoin Magazine and is written by Micah Zimmerman.