Block, the firm behind Cash App, announced in its Quarter 3 Shareholder Letter that it will be winding down TBD, it’s “Web5” initiative in order to “invest in our bitcoin mining initiative… and Bitkey, our self-custody wallet for Bitcoin.”

TBD was split into two primary projects: “Web5,” which was described as “a new identity and trust layer for the internet,” and tbDEX, which was supposed to be focused on “reimagining global payments and commerce.”

The “Web5” component was yet to be integrated into any significant projects, and the tbDEX project was yet to launch for any transactions.

Read more: Block whistleblower says firm ignored compliance, allowed terror groups

Ending these projects will apparently allow Square to focus resources on its bitcoin mining initiative, which earlier this year announced it had finished development of its own mining chip that it intends to supply to Core Scientific. 

It apparently intends to supply Core Scientific with approximately 15 exahashes/second of hashing power, which would represent approximately 70% of the approximately 21.8 exahashes/second that Core Scientific reported in its most recent investor update.

However, Core Scientific has not substantially deployed Block’s chip, noting, “substantially all of the miners we own and host were manufactured by Bitmain.” 

BitKey, launched at the end of last year, is a multi-signature bitcoin wallet that integrates a hardware wallet and cloud recovery options.

Currently the revenue for all these different projects is rolled into the “Corporate and Other” category on the filings with music streaming service TIDAL and this segment reported approximately $44 million in revenue for the last quarter, driven almost exclusively by subscriptions, presumably to TIDAL.

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Jack Dorsey’s fintech firm Block is being probed by federal prosecutors after a former employee claimed that “everything in its compliance section was flawed” and that it’s “led by people who should not be in charge of a regulated compliance program.”

As reported by NBC, the whistleblower also claimed that Block and its business units Cash App and Square transacted crypto for terrorists, facilitated payments for sanctioned countries, and flouted compliance protocols.

The whistleblower — a former Block employee — reportedly provided 100 pages of documents to prosecutors from the Southern District of New York that show the alleged malpractice. 

The documents allegedly detail how Block processed numerous crypto transactions for terrorist-designated groups. Meanwhile, Square and Cash App allegedly failed to collect relevant information from customers that would help assess risks.

Square also reportedly facilitated thousands of transactions with countries under economic sanctions.

Read more: Blockstream and Block plan $12M off-grid solar Bitcoin mining farm in Texas

Despite being alerted to these alleged breaches, the whistleblower says the Block failed to change any company processes. They claim that a mix of the transactions discussed with prosecutors, including bitcoin, credit card, and dollar transfers, were not reported to the government under law.  

They told NBC News, “From the ground up, everything in the compliance section was flawed. It is led by people who should not be in charge of a regulated compliance program.”

These allegations of an inadequate compliance program echo claims from a research report published last year by short-sellers Hindenburg Research. This report alleged that “Cash App suppressed internal concerns and ignored user pleas for help as criminal activity and fraud ran rampant on its platform.”

Block execs allegedly knew compliance pitfalls

The former employee’s lawyer, Edward Siedle, who previously represented the Securities and Exchange Commission, said, “It’s my understanding from the documents that compliance lapses were known to Block leadership and the board in recent years.”

A Block spokesperson told NBC News it voluntarily reported ‘thousands’ of the flagged transactions to the Office of Foreign Assets Control. The former employee, however, says this isn’t true.

The spokesperson added, “Block has a responsible and extensive compliance program and we regularly adapt our practices to meet emerging threats and an evolving sanctions regulatory environment.

“Continually improving the safety and security of our ecosystem is a top priority for Block. We have been and remain committed to building upon this work, as well as continuing to invest significantly in our compliance program.”

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Elon Musk’s X (formerly Twitter) is paying legal fees for a free speech lawsuit against Jack Dorsey’s company, Block. The irony is immediately obvious to long-time users of X: Dorsey co-founded Twitter, sold it to Musk so that he could focus on Block, and now X is paying to litigate against a Block employee.

Specifically, Chloe Happe v. Block Inc., involves a former Block employee who alleges that she was fired from her job at the company for statements she made on pseudonymous X accounts. She claims her two accounts were satirical and that she made the comments during private, non-working hours.

Nevertheless, despite the non-work related nature of these social media posts, Musk’s X is corporately funding her lawsuit against Block.

Don’t like Twitter censorship? Just buy it

Musk’s complaints against Dorsey’s version of censorship at Twitter were so great that he decided to simply acquire the platform outright. In 2022, Musk acquired Dorsey’s company in a transaction involving a group of investors.

Musk had previously criticized Twitter’s handling of obvious criminal activity like child exploitation while Dorsey was in charge. He now leads the censorship policy with plenty of examples of personal, editorial intervention.

Before Musk purchased Twitter, he vindictively promised to release ‘Twitter files’ that, in his opinion, would prove that Dorsey allowed politically motivated and US government-supervised content moderation on the platform. Musk was personally involved in revealing those files.

At the time, Dorsey fired back, criticizing Musk’s decision not to release all of these files at once, and questioning why he was involved in editorial decisions and crafting news media, rather than operating a social media platform for user (not owner) generated content.

Read more: Twitter is collapsing — and it’s hilarious

Even Dorsey had initially supported Musk taking the company private. Later, however, Dorsey said Musk’s decision was a mistake. “It all went south,” Dorsey lamented.

A regulatory filing did reveal that Dorsey retained a $1 billion stake in Twitter after it went private, maybe giving him a legitimate reason to be irked with Musk. That stake has shrunk precipitously, with X’s valuation dropping over 70% as of one post-acquisition financing round. Via this equity stake, Musk has caused Dorsey to lose money directly.

Not all conflict — they’re billionaires, after all

It’s not that Musk and Dorsey couldn’t cooperate on some things. Indeed, they both backed the Bitcoin Legal Defense Fund, for example, which helped Bitcoin developers successfully push back against Craig Wright’s torrent of lawsuits.

In another example, the two men had some back-and-forth over who actually controls so-called Web 3. Musk kidded about where he could find Web 3 — which barely exists. Dorsey cheekily agreed, placing it “between a and z,” a reference to venture capitalists Andreessen Horowitz (a16z). Both men have had historical conflicts with general partners at a16z. Mark Andreessen, for example, blocked Dorsey after several disagreements.

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Bitcoin development giant Blockstream and Jack Dorsey’s fintech venture Block (formerly Square) are breaking ground on an off-grid solar-powered Bitcoin facility in West Texas.

Announcing the project at the Bitcoin 2022 conference in Miami, Blockstream chief exec Adam Back said the $12 million project is intended to be a “proof of concept” for 100% renewable Bitcoin mining.

Back, whose Haschcash anti-spamming system is incorporated into the Bitcoin mining process, said: “This is a step to proving our thesis that Bitcoin mining can fund zero-emission power infrastructure and build economic growth for the future,” (via CNBC, our emphasis).

The unspecified location will draw power from Tesla’s Megapack 12- Megawatt (MW) rechargeable batteries which in turn will store solar power generated by a 3.8MW photovoltaics (solar panel) farm.

“You’re making a sort of calculation of the optimal economic mix between solar and battery,” Back explained.

“There’s 3.8MW of solar and one MW of mining, so you can see you have to over-provision, because the peak solar input varies during the day and, of course, it’s not there at night.”

Read more: [NZ hydro-powered data center will curb crypto mining if locals need energy]

Texas governor could use an off-grid solar Bitcoin mining farm

According to Back, onlookers will be able to see, in real-time, Bitcoin being mined with its solar power by a publicly accessible dashboard detailing the power output and BTC return. The Blockstream head hopes it will encourage more outfits to join their solar efforts.

Indeed, traditional Bitcoin mining places a heavy burden on local infrastructure. Replacing them with off-grid, solar-powered alternatives could be welcome in a state like Texas — it faced a particularly tough time last year due to unexpected strain on its power grid, thanks to an uptick in Bitcoin mining outfits.

Facing re-election last summer, Governor Greg Abbott campaigned on the belief that more mining could inspire energy companies to build more power plants in the state.

“Texas is open for crypto business,” Abbott tweeted in June, after crypto-friendly legislation passed. Only, the influx of mining firms left Texas’ power grid struggling. Residents were urged to curb their energy use — particularly air-conditioning.

After the unexpectedly warm weather waned, Abbott feared similar strains in the winter. The governor reportedly pleaded with local miners to help Texans get through the cold snap by switching off their machines should the grid begin to fail amid high demand. Only two firms reportedly agreed.

That February, a struggling grid left millions without power for days, with hundreds dead.

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Out now: the first four episodes of our ongoing investigative podcast series Innovated: Blockchain City.

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