Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Blockchain, Crypto, Digital Assets Regulations
SEC Enforcement Chief Grewal Leaves to Join Milbank LLP
SEC | Oct 7, 2024
Image by Freepik
Gurbir Grewal departs the SEC to work for Milbank LLP After Aggressive Enforcement Tenure
In an Oct 2 press release, the SEC announced that Gurbir S. Grewal, the Director of Enforcement will leave on October 11, 2024 to become a partner in the litigation and arbitration of Milbank LLP. During his three year tenure at the SEC, Grewal oversaw more than 2,400 enforcement proceedings and obtained more than $20 billion in fines and disgorgements. Sanjay Wadhwa, the current Deputy Director, will take over as Acting Director.
- As the crypto sector can easily attest to, during Grewal time at the SEC he oversaw cryptocurrency enforcement with over 100 actions targeting major platforms for securities violations, such as the sale of Ripple's XRP token, Coinbase's staking services, and Kraken's staking program too.
- Grewal boosted penalties to serve as deterrants, and more than $1 billion was awarded to whistleblowers during his time.
- He also emphasized recordkeeping compliance and transparency, which lead to over $2 billion in fines to regulated entities.
- Prior to Grewal's post at the SEC he served as New Jersey’s Attorney General focusing on securities fraud and economic crimes.
See: SEC Enforcement Director Grewal On Crypto Regulation
Gurbir S. Grewal:
“While we have faced and overcome many challenges over the last three plus years, there has been one constant throughout: the public servants of the Enforcement Division stand ready to do everything they can to protect investors and market integrity. Their expertise, professionalism, and dedication are, indeed, unparalleled, and it has been the privilege of a lifetime to have been able to call them colleagues. From recalibrating penalties and remedies to confronting emerging risks to holding issuers, insiders, and gatekeepers accountable, I am incredibly proud of all that we’ve accomplished as a Division during my tenure. I am grateful to Chair Gensler not just for the opportunity to lead the Division, but also for his unwavering commitment to investor protection and support of a robust enforcement program.”
Conclusion
Grewal's exit could signal a shift in SEC's enforcement after having set the standard for strong protection and aggressive regulatory compliance. He brings a wealth of securities enforcement experience to his new role as partner at Milbank LLP.
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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Binance Hits $100 Trillion as CZ Set for Early Release
Crypto | Sep 27, 2024
Image from Binance website
Binance Founder, Changpeng Zhao, Set for Early Prison Release Today
Changpeng Zhao (CZ) is anticipated to be released from prison today two days ahead of schedule because his original release date of Sept 29, 2024 falls on a weekend. Even while he will not be able to take on a leadership position at Binance for at least three years, his $60 billion fortune is still dependent on the platform's success because he is its biggest shareholder. CZ completed a four-month term including 2 months in a light security jail before being sent to a halfway home. What will CZ do next? While in prison he launched an Educational Platform Giggle Academy
Binance New CEO Announces $100 Trillion Total Trading Volume
When CZ was sent to prison, Richard Teng took over Binance as the new CEO, a former financial regulator who was overseeing compliance and regulatory partnerships. He has made it his mission to keep Binance focused on innovation and development while guiding it toward stricter regulatory compliance since taking the helm. This week, Teng announced that Binance exchange had surpassed a $100 trillion in total trading volume since launching in 2017 and under his leadership the company has now surpassed 230 million users via global expansion to jurisdictions like Indonesia, India, Kazakhstan, Thailand, and Dubai.
IPO on the Horizon?
In a recent interview with Coindesk, Teng made it clear that Binance does not have plans for an Initial Public Offering. Due to it's huge trading volume and rapid user growth, the company is profitably stable as it moves from a founder-led to a board-led sustainable enterprise.
Teng admits the complexities of managing a global crypto exchange with different laws in different countries. With 19 licenses worldwide including recent approvals in emerging regions.
Conclusion
Whether CZ moves into philanthropy, invests, or launches other new ventures, he will be influential in shaping the future of Binance's future path and the overall crypto landscape.
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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CSA Extends Deadline for Crypto Platforms’ VRCA Compliance
Crypto Regulation | Sep 26, 2024
CSA Extends Compliance Deadline for Crypto Platforms Trading VRCAs
The Canadian Securities Administrators (CSA) has published an update for crypto asset trading platforms (CTPs) and those with pre-registration undertakings (PRUs) on complying with requirements for value-referenced crypto assets (VRCAs), such as stablecoins. While Canada doesn't have specific stablecoin regulations, the CSA is enforcing existing securities laws to protect investors. The compliance deadline for platforms has been extended to December 31, 2024, giving CTPs more time to meet the requirements or offer alternatives that address investor protection concerns.
Compliance Deadline Extended
CTPs were originally given until April 30, 2024 to stop trading non-compliant stablecoins. But because of compliance difficulties the platforms were having, the deadline was initially extended to October 31, 2024, and then again to December 31, 2024. This extension gives CTPs additional time to comply with CSA regulations or offer substitute solutions to investor protection issues.
While stablecoins (a form of VRCA) are widely traded in Canada, the CSA emphasizes that there is not currently a specific stablecoin regulatory framework. Instead, the CSA is relying on existing securities regulations to ensure any VRCAs provided by CTPs meets the appropriate requirements of investor protection, financial transparency, and disclosure.
See: Regulatory Updates for Crypto Asset Trading Platforms
By December 31, 2024, all CTPs registered or with PRUs must ensure that any VRCAs issued to customers comply with their registration terms or PRUs. Platforms that were previously obligated to stop enabling customers to buy or hold non-compliant VRCAs (except for specific fiat-backed assets) by December 29, 2023, and the deadline extension does not change that.
Open to Exemptions for Specific Use Cases
The CSA is open to exemptions for particular VRCA use cases that do not raise investor protection concerns. CTP and VRCA issuers are urged to contact regulators about viable alternatives or unusual use cases to discuss.
Conclusion
The CSA's extended deadline allows CTPs more time to comply with VRCA-specific securities requirements.
See: CSA’s 2024 Investor Index. What Fintechs Need to Know
Establishing clear standards for the treatment of VRCAs would promote transparency and security for investors who trade in these assets.
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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Prager Metis Pays $1.95 Million for FTX Auditing Failures
Governance | Sep 25, 2024
Image: Freepik
Prager Metis Settle $1.95M SEC Fine Over FTX Audits
The collapse of FTX in November 2022 exposed major supervisory and governance gaps in what is now known as the biggest crypto fraud in history. An important participant in this fiasco was the auditing company Prager Metis CPAs who agreed to pay a $1.95 million fine to resolve allegations of audit failures in FTX and breach of auditor independence regulations that the Securities and Exchange Commission (SEC) had issue with.
Audit Failures and Negligence
From February 2021 to April 2022, Prager Metis was responsible for auditing FTX according to the Generally Accepted Auditing Standards (GAAS) but the SEC took enforcement action and a court judge raised the following issues:
- Prager Metis did not adequately assess the risk between FTX and Alameda Research which was controlled by FTX's CEO Sam Bankman Fried and led to the misappropriation of billions in customer funds.
- Prager Metis put together an audit team without the skills or experience required to audit a fast changing crypto company like FTX. As a result, the Prager Metis failed to recognize significant warning signs, such as FTX's substantial holdings in illiquid tokens and its close relationship and financial links to Alameda.
See: Which Companies Were Affected by FTX’s Collapse?
- Prager Metis's audit reports misled investors into believing that FTX's financial statements were accurate and followed Generally Accepted Accounting Principles creating a false sense of security.
- The judge emphasized that Prager Metis's inclusion of indemnity clauses in their engagement letters was a violation of auditor independence regulations. This hurt their ability to stay unbiased when reviewing over 200 companies from 2017 to 2020, including FTX. As a result, the reliability of their audits was questioned.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement:
"Prager Metis fell short in all of these areas. Because Prager’s audits of FTX were conducted without due care, for example, FTX investors lacked crucial protections."
SEC Settlement
- A $745 000 civil fine for fraud based on carelessness. This fine was imposed in response to the company's violations of auditing practices when working with FTX.
- $1.205 million penalty for violating auditor independence requirements involving incorrect indemnity arrangements in over 200 audit engagements between 2017 and 2020.
- Remedial action to hire an independent compliance expert who will review and improve its audit and quality control processes. Additionally, restrictions on Prager Metis's ability to take on new audit customers was restricted.
See: The Complexities of Auditing Digital Assets
Jorge G. Tenreiro, Acting Chief of the SEC's Crypto Assets and Cyber Unit:
“Cutting corners on obligations to comply with the law… does not pay for the entities who take them or for the multitude of victims that this misconduct leaves in its wake”.
Conclusion
The penalties against Prager Metis raise important questions about whether auditors are prepared to handle quickly evolving and risky industries like cryptocurrency. Auditors must stay independent, skilled, and skeptical to protect investors. In the case of FTX, failing to meet these standards led to major financial losses and damaged public trust in both the auditing profession and the markets.
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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Caroline Ellison Sentenced 2 Years for Role in FTX Fraud
FTX Saga | Sep 25, 2024
Image: Freepik/rawpixel.com
Ex-Alameda CEO Caroline Ellison Gets 2 Years for Covering Up One of Crypto's Biggest Frauds, FTX
Yesterday, a key figure in Sam Bankman-Fried's (SBF) cryptocurrency business and the former CEO of Alameda Research, Caroline Ellison received a two-year jail term for her involvement in the FTX scam, which caused consumer and investor losses of billions of dollars. Compared to SBF who received 25 years in prison, Ellison received a lighter sentence as a result of her cooperation with the police during the trial but the crypto sector will always be affected by her role in this well publicized drama.
Caroline Ellison:
"I participated in a criminal conspiracy that ultimately stole billions of dollars from people who entrusted their money with us. The human brain is truly bad at understanding big numbers. Not a day goes by [that I don't] think about all of the people I hurt.”
See: Key Moments Inside the SBF Trial: Days 1-12
Ellison played a unique role in what is now seen as one of the biggest bitcoin scams ever. More than $8 billion in consumer cash was lost in FTX's collapse as a result of Alameda Research's speculative and unlawful trading activities that used FTX's customer deposits under Ellison's direction. Ellison was facing a maximum term of 110 years of jail time but her sentence was lowered to only 2 years by cooperating with federal officials. She is also required to forfeit around $11 billion of her assets to the courts.
Bloomberg reported live on the sentencing. Signalling that the severity of the fraudulent activities warranted consequences, Judge Kaplan said:
A “literal get-out-of-jail-free card I can’t agree to.”
“I’ve seen a lot of cooperators in 30 years. I’ve never seen one quite like Ms. Ellison."
Conclusion
After months have gone by since SBFs 25 year sentencing, the FTX drama has resurfaced with Caroline Ellison's 2 year sentencing, raising more general concerns about accountability, governance, and legal safeguards in the crypto space.
See: SEC Enforcement Director Grewal On Crypto Regulation
When the dust settles, the case will probably force regulators in the U.S. and around the world to adopt stronger standards designed to stop fraud of this kind in the future to protect investors. Ellison will remain free on bail until November 7.
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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Kraken Responds To SEC Securities Accusations
Sep 20, 2024
Image: Freepik/PiggyBank
In what is becoming a protracted legal battle, Kraken has responded to the US Securities and Exchange Commission’s assertions that the exchange is violating securities laws.
The SEC has claimed that Cardano, Algorand, and a host of other assets on the Kraken exchange have securities status, meaning that Kraken is training unregistered securities. They have also claimed this means that the exchange has failed to meet the reporting requirements that are levelled at such exchanges.
Kraken has recently reiterated its position that crypto assets do not qualify as securities and, therefore, the SEC has no jurisdiction over them or other exchanges, as the case is now being heard.
Cryptocurrency As A Payment Method
Cryptocurrency is used for peer-to-peer payments, cross-border payments, and ecommerce payments.
It has also become popular with some of the top casino apps in CA as it offers anonymous, private, secure payments at a fraction of the cost and speed of traditional payments. Sports betting and slots writer Jamie Wright claims that payments and withdrawals can be completed in a matter of seconds.
Cryptocurrencies As Securities
However, as well as being used for payments and purchases, crypto is also often seen as a form of investment. High volatility in the market means there is considerable risk, but this also means there is huge potential profit.
And speculators have made vast sums by buying into the likes of Bitcoin, Ethereum, and other cryptos. Ever since Bitcoin launched, and especially since it has gained more widespread adoption, governments and government agencies around the world have struggled with how to classify crypto and whether to regulate these digital assets.
Regulation
On the one hand, regulation would offer buyers protection against the collapse of exchanges, and put other security measures in place for users.
Crypto proponents point to cryptocurrency’s decentralized nature and its privacy, claiming that regulation would diminish these benefits. The disagreement has firmly pitted crypto exchanges and the SEC against one another.
Kraken Takes On The SEC
In May 2023, crypto exchange Kraken faced the House Financial Services Committee and the House Agriculture Committee and, in doing so, they said that more robust regulations would help protect investors.
However, they also argued that the SEC was overstepping its jurisdiction and that, in any new regulations, the SEC should be overlooked in favour of other regulators.
The SEC’s Retaliation
The day after the hearing, the SEC filed a lawsuit against Kraken accusing them of trading unregulated securities. There was much debate over the filing. Kraken argued that there was no contract and that the tokens available on their exchange did not constitute securities.
The SEC argued that the tokens are “digital asset securities”: a term they themselves coined. At the time of the filing, Kraken stated that the SEC contradicted its own definitions of securities and went against generally accepted definitions and regulations.
The Court Case
Last week, Kraken requested that the case against them be heard in a US court and that they be given a jury verdict. This follows a decision by a California judge, last month, that the case would go ahead.
The SEC has claimed that ADA, ALGO, ATOM, FIL, FLOW, ICP, MANA, MATIC, NEAR, OMG, and SOL all qualify as securities. They state that Kraken has failed to properly register as a broker or exchange, and they have requested that the exchange pay a portion of the profits it has made in fines.
Interestingly, the filing only relates to the 11 tokens listed and does not include BTC or ETH, which the SEC has previously claimed do not qualify as securities, despite their similarities to other tokens.
The Implications
The SEC has also filed similar cases against Coinbase and Binance, and judges have recently also ruled that these cases will also proceed to court. The outcome of these cases could have significant implications on the cryptocurrency market, at least in the US and for anybody who uses US exchanges.
If it is determined that Kraken, Coinbase, and Binance have indeed acted as securities exchanges, it will mean they will have to report data to the SEC and will have to meet regulatory requirements that could see their exchange offerings change considerably.
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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Crypto Mom & Uyeda Defend Flyfish Club NFTs as Utilities
NFTs | Sep 20, 2024
Image: Freepik
SEC Commissioners Peirce and Yueda Disagree with Flyfish Club NFT Enforcement Case
The U.S. Securities and Exchange Commission (SEC) announced an enforcement action against Flyfish Club, a company that offered NFT memberships for a private dinner experience. Two SEC commissioners, Hester Peirce and Mark Uyeda, publicly disagreed with the ruling saying that the Flyfish NFTs were incorrectly categorized as securities. The case has garnished a lot of attention including in Canada where NFT regulation is still a topic of interest.
Flyfish Club's NFT Offering
Flyfish Club is a high-end exclusive eating club in New York City that sold membership NFTs as the only way to access their restaurant. There were two types of NFTs: A standard NFT for general access to the restaurant club, and an 'Omakase' NFT offering access to a special private sushi dining room. Between 2021-2022, Flyfish Club sold $14.8 million of NFTs to holders who were allowed to resell or lease their tokens, which triggered the SEC to classify the NFTs as securities investments. The SEC argued that the Flyfish NFTs should have been registered as securities because the tokens were sold with the expectation of profit from secondary market sales and royalties.
Peirce and Uyeda Criticize the SEC’s Decision
Peirce and Uyeda strongly disagreed with the SEC's decision saying that the Flyfish NFTs were utility tokens and not securities since they were designed to provide access to a dining experience.
See: Two Artists Sue SEC for NFT legal Showdown
- Smells like 'regulatory overreach'. The two commissioners argued that the SEC's focus should be on cases involving fraud or blatant breaches of securities laws, and not innovative projects that sell membership access. The Flyfish NFTs were access tokens and the SEC overreached.
- Utility vs. Security: They emphasized that a product's potential resale value does not always qualify it as a security, and that the Flyfish NFTs offered utility. Peirce and Uyeda believe the SEC incorrectly applied the Howey Test, which determines whether a transaction constitutes an investment contract.
- Stifle Innovation: The commissioners expressed concern that the SEC is stifling NFT innovation, and that utility access NFTs are a tool for creators (i.e, chefs, artists, entrepreneurs) to monetize access to unique experiences or content.
Implications for Canada
NFT regulation in Canada is still a work-in-progress but the Flyfish Club NFT case raises serious issues about how Canadian regulators should approach and handle NFTs that are merely selling access to events or memberships.
See: Dapper Labs Settles NFT Lawsuit, Signs of Regulation?
Imagine if an event organizer that sold NFT tickets to VIP access to network with speakers was slapped with securities law violation.
Need for Regulatory Clarity
The Flyfish Club case is a good reminder that regulatory clarity is needed for investors, NFT developers and creatives alike.
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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