Key takeaway: Merchants and processors that rely on automated account-freeze triggers should expect closer regulatory scrutiny. Regulators increasingly want faster turnaround times for frozen funds. They also want clearer escalation paths, especially on the merchant side of the business.
The Federal Trade Commission is investigating Block Inc., the parent company of Cash App and Square. The agency wants to know whether Block violated US consumer protection law. At issue: Block froze or deactivated customer accounts, then allegedly failed to give those customers adequate help afterward. Bloomberg reported the inquiry, citing new court filings.
In the filings, the agency asked a federal judge in the Northern District of California for an order. The judge would require Block to turn over documents in the case. The case is docketed as FTC v. Block, No. 4:26-mc-80299.
The FTC said it opened the investigation last year. It sent a formal demand for records in January, after receiving more than 1,500 consumer complaints.
According to Bloomberg’s review of the filings, the allegations center on Square merchant accounts, not Cash App’s consumer-facing side. Block froze or deactivated these Square accounts at various points since 2022. Merchants say the frozen accounts held funds totaling as much as $2.5 million. They say they could not access those funds, even after completing identity and bank-verification steps. The FTC has not confirmed this figure as an official finding of loss; it reflects allegations in the agency’s petition.
Block told Bloomberg it is working with the FTC “in good faith…to bring about the closure of this matter.”
The FTC’s petition also referenced Block’s announcement earlier this year that it would cut roughly 4,000 positions. Block tied the cuts to its shift toward artificial intelligence. At the time, Jack Dorsey, Block’s chief executive and founder, described the cuts this way. He said AI efficiencies, not financial strain, drove the cuts. Bloomberg reported that large sections of the court filings remain redacted. That means the full scope of the FTC’s allegations is not yet public.
Why it matters: Account freezes tied to fraud and compliance screening are standard practice across payment platforms. This probe tests something different. It asks how much customer service and documentation the FTC expects from a payment platform. That question matters most when a freeze locks up real merchant revenue for years at a time. A finding against Block could push other payment platforms to formalize faster review and appeal processes for frozen funds. That pressure would likely fall hardest on the merchant-facing side of their businesses.
Sources: Digital Transactions; Bloomberg Law
