Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Trump Order Redefines Regulatory Violations
Enforcement | May 12, 2025
Image: AI Freepik
Agencies Must Now Prove Intent Before Pursuing Regulatory Crimes
On May 9, 2025, U.S. President Trump signed an executive order called 'Fighting overcriminalization in federal regulations' that changes how federal agencies can or cannot pursue criminal enforcement for regulatory violations, redefining risk for fintech and crypo leaders. The policy order says prosecutors must now show clear evidence that a person or company intended to break the law before charging them criminally.
See: Celsius Founder Sentenced to 12 Years for Crypto Fraud
This move targets the issue of overcriminalization and aims to reduce legal risk for businesses that unknowingly violate complex or technical rules. It could reshape how enforcement decisions are made in fintech, crypto, and other innovation-driven sectors.
The Executive Order Directs All Federal Agencies
Here's a link the fact sheet published by the White House. Essentially the order mandates all federal agencies to:
- Each federal agency must consult with the Attorney General and compile, publicly post, and maintain annually a list of all enforceable criminal regulatory offences.
- The order discourages criminal enforcement for regulatory offences unless there is clear evidence that the individual or entity knowingly violated the law, causing or risking substantial public harm. Strict liability offences that do not require proof of intent are generally disfavoured.
- If intent cannot be established, agencies are encouraged to pursue civil or administrative remedies instead of criminal prosecution. This aims to prevent individuals and businesses from facing criminal penalties for unintentional regulatory violations.
See: Bank of Canada Warns PSPs Enforcement Coming
- All agencies in consultation with the Attorney General must publish guidance within 45 days of the order, outlining the factors considered when referring violations for criminal enforcement.
- The executive order explicitly states that the new standards do not apply to immigration or national security matters. For all other areas, criminal liability now depends on whether someone knowingly violated a law or rule.
Who Might Benefit from This Policy Change
1. A good example may be former Binance CEO, Changpeng Zhao (CZ) who was sentenced to four months in prison in 2023 for violating the Bank Secrecy Act. The case focused on compliance gaps, not fraud. Similar enforcement actions in the future might be handled differently if there was no evidence of intent.
2. These two former Coinbase employees, Ishan and Nikhil Wahi, were convicted of insider trading using confidential listing information. Since their actions were deliberate, the order may not directly apply to them but it might influence how prosecutors approach future cases involving gray areas in trading conduct.
3. Fintech and crypto companies operating in complex and evolving regulatory environments may benefit the most. The new policy could limit criminal risk for teams that unintentionally violate reporting, registration, or compliance rules.
Examples of Who May Not Benefit
4. Sam Bankman-Fried was convicted in 2023 and sentenced to 25 years in prison. The FTX founder was found guilty of fraud, conspiracy, and misuse of customer funds. Courts found that his actions were intentional and deceptive, so the order likely does not apply in his case.
5. Alex Mashinsky former Celsius CEO pleaded guilty to fraud and market manipulation and recently received a 12 year prison sentence for crypto fraud and knowingly misleading customers. As a result, his case also likely falls outside the scope of the new enforcement policy.
Outlook
The new policy directive places the burden on agencies to prove intent before pursuing criminal charges. The change may protect founders, operators, and teams from facing prison time over technical mistakes or unclear compliance rules in an ever evolving regulatory environment.
See: Investing in the Future of AI and Blockchain
While the order does not affect past convictions, it may influence how courts and prosecutors handle ongoing investigations. It also gives legal teams a new foundation to challenge charges that lack clear evidence of intentional wrongdoing.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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