Block Hit with Securities Class Action in Wake of April 2022 Data Breach Announcement

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A Block investor has filed a proposed class action lawsuit after the fintech company’s April announcement of a mid-December 2021 data breach supposedly triggered a drop in stock price.

The 20-page case alleges stockholders were given no warning before Block (formerly Square Inc.) disclosed to the public on April 4, 2022 that a former employee had improperly downloaded reports containing sensitive customer information from Block subsidiary Cash App Investing in mid-December of last year. 

Per the suit, the announcement of the data breach, which reportedly affected as many as 8.2 million Cash App Investing customers, caused Block’s share price to fall 6.4 percent, financially injuring investors.

The lawsuit says that in the lead-up to the data breach announcement, Block, CEO Jack Dorsey and CFO Amrita Ahuja misled or failed to disclose to investors that the company lacked sufficient data security to protect customers’ information, that a former employee had accessed that information without authorization, and that Block was therefore “reasonably likely” to experience reputational harm. In light of this, the defendants’ positive statements about Block’s business, operations and prospects were misleading or “lacked a reasonable basis,” and the value of the company’s securities was artificially inflated, according to the suit.

The lawsuit relays that Block disclosed on April 4 that a former employee who had access to certain reports containing Cash App Investing customers’ information improperly downloaded those reports after their employment ended. Per the suit, the reports included customers’ full names, brokerage account numbers, portfolio value and holdings, and stock trading activity. Per the suit, Block had not warned investors of the data breach prior to April 4, and they were injured financially when the company’s stock value dropped by 6.4 percent on April 5, the case says.

The complaint notes that a proposed class action filed against Block in the wake of the data breach alleged that the company had “fail[ed] to exercise reasonable care in securing and safeguarding customer information” and had provided “untimely” and “woefully deficient” notice to data breach victims.

The instant case looks to represent persons or entities who purchased or otherwise acquired Block securities between November 4, 2021 and April 4, 2022 and were damaged thereby.

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