Once again Summers has resigned just before a company became embroiled in scandal. Will anyone ask him what role he had in this scandal? When will his silent resignations begin to raise red flags? If the former Treasury Secretary has concerns, shouldn’t he be bringing attention to the issue rather than attempting to protect his reputation?
On February 9th, Larry Summers, the former Secretary of the Treasury and current Charles W. Eliot University Professor at Harvard, resigned from his position on the board of Block Inc. effective immediately. This was a surprise to many, as Summers had served on the board of the company for more than a decade and his term was set to expire until later this year. After his resignation, the company claimed that Summers’ departure was “not a result of any disagreements with the company on any matter relating to the Company’s operations, policies or practices”. One week later, it was announced that federal regulators were looking into Block Inc.’s preeminent product, CashApp, for lax oversight that allegedly enabled money laundering and terrorist financing through the platform. The investigation began as a result of a whistleblower report to FinCEN, the Department of the Treasury’s agency tasked with combating financial crimes.
This is not the first allegation of wrongdoing by Block Inc. The company was hit with a shareholder lawsuit last year for its purchase of music streaming company Tidal, something a judge found to be “by all accounts, a terrible business decision,” but not illegal. More seriously, however, an investigation of the company by Hindenburg Research published in March of last year found that the company had deceived government agencies, consumers, and investors alike for years, making billions of dollars in the process. The allegations included inflated user metrics, widespread use of predatory loans, deceptive fees, and a company reliance on the business of criminals. The allegations about the app’s use by criminals seem to match up with the claims that have led to the new federal probe.
Summers’ resignation from Block Inc. is particularly interesting given his resignation from another firm, Digital Currency Group (DCG) sometime in 2022 (neither Summers nor DCG has clarified when his resignation took effect). In October of 2023, the New York Attorney General announced a lawsuit against DCG, one of its subsidiaries, and its CEO for defrauding investors of over $1 billion. While the lawsuit was filed in October of 2023, many of the events alleged in the lawsuit transpired while Summers was still a senior advisor to DCG. Summers’ involvement with DCG’s alleged fraudulent activity has largely gone unnoticed by the financial and political press who rely on him for pithy quotes regarding the President’s economic policies, but it is suspicious to say the least, especially given the latest allegations against Block and his sudden resignation.
Summers’ resignations from Block and DCG are also interesting given Summers’ 2018 resignation from LendingClub, a prominent Fintech firm. Summers resigned without explanation, although less than a month after his departure the company was charged by the Federal Trade Commission with deceiving consumers by charging hidden fees. The company ended up settling with the FTC for $18 million.
Summers should not be allowed to continue as a media talking head without explaining the extent of his knowledge of Block’s business practices and the reasons for his resignation. This is all the more important given the public report made a year ago on this same subject. The only difference is the potentially increased scrutiny generated by a federal investigation.
Summers seems to have a pattern of resigning from companies right before government accountability for their lawbreaking. This continuous involvement with companies flaunting the law cannot be ignored. Both his employers and the media should be asking tough questions about his role at Block and how that may impact his credibility going forward. And OpenAI investors may want to pay attention to their newest board member. Any departure clearly signals a scandal is about to be made public.