Block hit with derivative investor lawsuit over 2021 Cash App data breach

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Cash App data breach investor lawsuit overview: 

• Who: David C. Katz filed a derivative investor lawsuit on behalf of Block Inc. against the company’s board of directors.
• Why: Katz claims the board failed to properly monitor and protect the personally identifiable information of its Cash App customers during a December 2021 data breach.
• Where: The lawsuit was filed in New York federal court. 

Global technology company Block Inc.’s board of directors failed to properly monitor and protect its customers’ personally identifiable information during a December 2021 data breach of its Cash App platform, a new derivative investor lawsuit alleges. 

Plaintiff David C. Katz, on behalf of Block, claims the board allegedly knew of its legal requirement to protect its customers’ information and its need to adopt “reasonable best cybersecurity practices.” 

Katz argues Block’s board of directors acknowledged data security risks “repeatedly” in public findings yet still failed to prevent security breaches on the Cash App platform. 

“Security breaches on the Cash App platform dating back to 2020, should have, but did not, serve as red flags to spur the Individual Defendants to investigate and take action,” the Block lawsuit states. 

As a result, CashApp suffered a “major data breach” in December 2021 that potentially compromised the personally identifiable information of more than 8 million of its customers, according to the Block lawsuit. 

Block waited more than four months to disclose Cash App data breach, lawsuit claims

Katz argues Block’s board of directors “compounded the damage” of the data breach by allegedly “failing to cause Block to comply with the various federal and state laws requiring timely disclosure to consumers that their PII was unlawfully accessed.” 

Block ultimately waited more than four months to disclose the Cash App data breach, with Katz arguing “nefarious actors” were able to “use and sell Block’s customers’ stolen PII as they pleased” during this time.

Block’s stock price dropped by 6.4% in one day after the company disclosed the data breach, with the fallout causing the company to sustain “substantial damages and irreparable injury to its reputation,” the Block lawsuit alleges.

Katz accuses Block’s board of directors of breach of fiduciary duties, aiding and abetting and violating the Securities Exchange Act of 1934. 

He demands a jury trial and requests declaratory relief along with an award of restitution and a disgorgement of profits, benefits, and other compensation. 

A consumer filed a similar class action lawsuit against Block and Cash App in November, arguing the companies failed to prevent a data breach that exposed personal information.

Have you been impacted by the Cash App data breach? Let us know in the comments! 

The plaintiff is represented by David C. Katz and Mark Smilow of Weiss Law.

The Block lawsuit is Rubin v. Dorsey, et al., Case No. 1:23-cv-00322, in the U.S. District Court for the Southern District of New York. 

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