Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Cyber Security, Quantum, Hacks, Fraud Alerts, Risks, InsurTech
U.S. Court Orders Binance CZ to Surrender Canadian Passport
CZ | March 14, 2024
Changpeng Zhao, the founder of Binance, has been ordered by a U.S. district court to surrender his Canadian passport
As reported in the WSJ, this move comes as part of revised bail conditions amidst ongoing legal challenges facing Zhao. The court's decision was influenced by the Ministry of Justice's request, leading to Zhao being required to hand over all valid and expired passports.
This decision underscores the gravity of the legal proceedings against Zhao, who, in November 2023, pleaded guilty to violating the Bank Secrecy Act and agreed to pay a massive $4.3 billion fine. Following his plea, Zhao was released on a $175 million bail, with conditions now tightened to prevent any international travel without court approval.
See: Binance Under DOJ Microsope and Unprecedented Monitorship
The updated bail terms stipulate that Zhao must stay within the continental U.S. until his sentencing, with any travel within the country to be reported to pretrial services. Zhao's legal team has been exploring alternatives that would allow him to travel abroad, highlighting the international dimension of his personal and professional life.
The recent directive from U.S. District court Judge Richard A. Jones mandates that Zhao must notify the court's Pretrial Services of any domestic travel plans and is prohibited from international departure before his sentencing. Zhao must entrust his Canadian passport to a third-party custodian, appointed from his legal team's staff. This appointed custodian is also tasked with accompanying Zhao on any journeys requiring identification.
Zhao must relinquish all passports, whether current or expired, to his legal representatives and is forbidden from acquiring new passports or travel documents without explicit court consent. These precautions are designed to guarantee Zhao's presence within the United States' legal boundaries, especially given the lack of an extradition agreement with the United Arab Emirates—a country to which Zhao has expressed a desire to return and where his family predominantly resides.
See: New Binance CEO’s First Thoughts + His Latest
The sentencing, initially scheduled for March, has been postponed to April 30, with Zhao facing up to 18 months in prison for his guilty plea related to anti-money laundering law violations in the U.S.
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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FINTRAC Responds to Cyber Incident with System Shutdown
Cybersecurity | March 6, 2024
Image: Freepik
FINTRAC Takes Precautionary Measures Amid Cybersecurity Threat
In a proactive response to a cybersecurity incident, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) has temporarily shut down some of its systems. This measure aims to protect sensitive data and maintain the integrity of Canada's financial intelligence operations.
FINTRAC, which plays a crucial role in the detection, prevention, and deterrence of money laundering and terrorist financing activities, emphasized that the incident did not compromise its intelligence or classified systems. The agency's swift response to take its corporate systems offline aims to ensure the integrity of its operations and protect the information it maintains. Collaborating closely with federal partners, including the Canadian Centre for Cyber Security, FINTRAC is actively working to protect and restore its systems.
See: SEC vs. Canada: Cybersecurity Rules Overview
This incident is part of a series of recent cyber events targeting federal bodies, underscoring the importance of robust cybersecurity measures. In the past, other federal entities, including the RCMP last month and Global Affairs Canada in January 2024, have also faced cyber challenges, prompting investigations and heightened security protocols.
FINTRAC statement dated March 3, 2024
Over the last 24 hours, FINTRAC has and continues to manage a cyber incident. The incident does not involve the Centre's intelligence or classified systems. As a precautionary measure, FINTRAC has taken its corporate systems offline in order to ensure their integrity and to protect the information that the Centre maintains. FINTRAC is working closely with its federal partners, including the Canadian Centre for Cyber Security (Cyber Centre), to protect and restore its systems. FINTRAC will provide updates on its website as they become available.
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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SEC Intensifies Accounting Audits in 2023
Report | Feb 29, 2024
Sharp increase in SEC enforcement on accounting practices in FY 2023
The Securities and Exchange Commission (SEC) significantly stepped up its enforcement actions concerning accounting and auditing in the fiscal year 2023, as detailed in a recent report by Cornerstone Research as pointed out by at The D&O Dairy This marked increase, particularly pronounced in the fiscal year's final quarter, highlights the SEC's reinforced efforts to ensure financial transparency and uphold regulatory standards. With a 22% rise in accounting and auditing enforcement actions.
- The SEC initiated 83 accounting and auditing enforcement actions in FY 2023, a 22% increase from 68 actions in FY 2022. This represents the highest annual number of such actions since FY 2019, emphasizing a renewed regulatory emphasis on accounting standards and auditing integrity.
- Of the 83 actions, 71 (86%) were administrative proceedings, an increase from 75% in FY 2022. This indicates a preference for internal regulatory processes over civil court actions, with the SEC bringing 12 civil actions in FY 2023, down from 17 in the previous year.
- Among the individual respondents, 24% were CEOs, and 22% were CFOs. This highlights the SEC's focus on holding top corporate executives accountable for financial oversight. Approximately one-third of individual respondents were Certified Public Accountants, being scrutinized on professional ethics and responsibilities in financial reporting.
See: SEC’s Escalating Crypto Enforcement
- The SEC initiated 11 actions against non-U.S. respondents, up from 5 in FY 2022. Actions involved respondents from Canada, the Netherlands, Ireland, the UK, Singapore, and more, indicating the global reach of SEC's enforcement efforts.
- Despite the increase in enforcement actions, aggregate monetary settlements in these cases decreased by 7% to $583 million in FY 2023. Civil penalties constituted 33% of the total settlements, with the remainder attributed to disgorgement and prejudgment interest, highlighting the financial repercussions of non-compliance.
Why It Matters
The SEC's ramped-up enforcement actions in accounting and auditing during FY 2023 signal a clear directive towards enhanced financial accuracy and ethical auditing practices. For fintech executives, investors, and stakeholders, understanding and adapting to these regulatory dynamics is crucial for ensuring sustainable business practices and fostering a transparent financial environment.
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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SEC vs. Canada: Cybersecurity Rules Overview
Cybersecurity | Feb 28, 2024
Image: Freepik/DC Studio
Comparing U.S. SEC and Canadian Cybersecurity Regulations for Businesses
The introduction of new SEC cybersecurity rules in 2023 has further highlightetd the importance of board involvement in cybersecurity oversight. Skadden, Arps, Slate, Meagher & Flom LLP wrote an informative article on emerging expectations for public companies in the U.S. Below we compare at a high level the new SEC rules with the Canadian regulatory landscape including implications for startups and scaleups.
United States
- The SEC mandates that public companies report material cybersecurity incidents within four business days of determining their materiality. Prompt disclosure fullstop.
See: OSFI’s New Security and Integrity Guideline 2024
- Companies are required to disclose their processes for identifying, assessing, and managing cybersecurity risks in their annual reports, including the board's oversight role.
- There's a strong emphasis on the board's active engagement in cybersecurity oversight, with specific requirements for documenting the board's oversight of cybersecurity risks.
Canada
- The Canadian Securities Administrators (CSA) issued guidelines in December 2023 rather than strict rules for cybersecurity disclosures. These guidelines encourage companies to disclose material cybersecurity risks and incidents but do not specify a strict timeline for disclosure like the SEC's four-business-day requirement.
- Canadian regulations tend to emphasize a risk-based approach, urging companies to consider the likelihood and magnitude of harm from cybersecurity incidents when determining materiality for disclosure purposes.
- Canada has robust privacy laws, such as the Personal Information Protection and Electronic Documents Act (PIPEDA), which require businesses to protect personal information and report breaches of security safeguards that pose a real risk of significant harm to individuals. This complements cybersecurity disclosure by focusing on the protection of personal data.
See: Blakes: Cybersecurity Trends in Canada: A 2023 Perspective
- Canada has implemented a national cybersecurity strategy that includes initiatives to improve the cybersecurity posture of businesses, including small and medium-sized enterprises. This strategy supports a broader approach to cybersecurity resilience across the economy.
Key Differences and Similarities
- One of the main differences is the mandatory nature of the SEC's disclosure requirements versus the more voluntary, guideline-based approach taken by Canadian regulators.
- The SEC provides a specific timeline for reporting material cybersecurity incidents, which is not explicitly matched by Canadian guidelines.
- Both countries emphasize the importance of protecting personal information, but Canada's approach is underpinned by specific privacy legislation that requires breach notification based on the risk of harm.
Implications for Startups and Scale-Ups
For startups and scale-ups in Canada, understanding both the Canadian and U.S. regulatory environments is critical, especially for those operating or planning to operate in cross-border contexts. While Canada's approach may offer more flexibility, the trend in both countries reflects a growing emphasis on transparency, accountability, and proactive risk management in cybersecurity.
See: Cavelo Inc. Raises CAD$5M to Advance Cybersecurity Solutions
Canadian companies, especially those considering going public or expanding into the U.S. market, should be mindful of these regulatory differences and prepare accordingly. Adopting best practices from both regulatory frameworks can enhance a company's cybersecurity posture and its attractiveness to investors and partners in an increasingly digital and interconnected business environment.
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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NBA in Legal Battle Over Crypto Marketing
News | Feb 8, 2024
Image: Freepik/Midjourney
NBA Faces Lawsuit for Alleged Negligence in Crypto Exchange Marketing Deals
The National Basketball Association (NBA) is currently embroiled in a significant legal challenge, accused of "gross negligence" for its marketing affiliations with the now-defunct crypto exchange Voyager Digital Holdings Inc.
- Investors have filed a lawsuit against the NBA, claiming the association was "grossly negligent" in its marketing agreement with Voyager Digital Holdings Inc., facilitated by Mark Cuban, the then-owner of the Dallas Mavericks.
- This partnership, formalized through a five-year deal making Voyager's token the official cryptocurrency of the Mavericks, is blamed for leading investors into what is described as "an unregulated and unsustainable fraud," culminating in $4.2 billion in losses. The situation was further complicated when Voyager filed for Chapter 11 protection from creditors in 2022, leading to a court-authorized liquidation of assets to repay a portion of the crypto held on its platform to customers.
See: Kim Kardashian Pays $1.26M to the SEC in Penalties for Unlawfully Touting Crypto
- In 2022, Mark Cuban faced legal action for his promotion of Voyager's offerings. The lawsuit accused him of endorsing Voyager's products, specifically the platform's Voyager Earn Program Accounts (EPAs), as viable investments, despite allegations that he was aware these were "unregistered securities."
- The lawsuit not only targets the NBA but also implicates Voyager's legal advisors, McCarter & English, accusing them of producing fraudulent legal opinions that contributed to the alleged conspiracy. This highlights the broader implications of the case, affecting various stakeholders within the crypto and legal sectors.
- The collapse of Voyager and similar crypto entities like FTX has spotlighted the influence of celebrity endorsements in the crypto market. High-profile figures, including sports stars and entertainers, have faced lawsuits for their promotional activities, emphasizing the legal risks associated with celebrity-driven marketing in high-risk financial products.
Why It's Important
This legal battle may set a precedent for how sports organizations approach partnerships with financial and tech companies, especially in emerging and volatile markets like cryptocurrency.
See: FTX Fallout: Stephen Curry and Tom Brady Reportedly Under Investigation in Texas
This case could prompt stricter scrutiny and regulations on sports organizations' marketing deals, especially those involving financial products, to protect investors and maintain the integrity of the sports industry.
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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Stolen Crypto Funds Halve in 2023 Despite More Hack Attempts
Report | Feb 7, 2024
Image by macrovector on Freepik
Stolen Crypto Funds Drop Over 54.3% in 2023 Despite Persistent Threat of Hacking
The recent analysis by Chainalysis has provided the crypto community with a detailed examination of the hacking landscape in 2023, revealing trends that are both encouraging and concerning. The report, "Stolen Crypto Falls in 2023, but Hacking Remains a Threat," offers a comprehensive look at the state of cryptocurrency security, highlighting the significant decrease in stolen funds alongside an uptick in hacking incidents. Below are a few key findings.
See: Calgary Police and Chainanalysis Launch the Western Canada Cryptocurrency Investigations Centre
Chainalysis's comprehensive analysis reveals a notable decrease in the total value of stolen crypto, which fell by approximately 54.3% to $1.7 billion, down from 2022's record-breaking $3.7 billion. This decline is primarily attributed to a reduction in DeFi hacking incidents, which had previously been the main catalyst for the surge in crypto thefts.
Despite the encouraging decline in stolen funds, the report indicates a slight uptick in hacking activity, with the number of incidents rising from 219 in 2022 to 231 in 2023. This suggests that while the impact of individual hacks may be diminishing, the threat landscape remains active and evolving.
DeFi's Evolving Security Landscape
The report shows that there was $1.1 billion in total value stolen from DeFi platforms in 2023 which was a 63.7% decrease year over year. This reduction in DeFi protocol victimization marks a significant shift in the landscape of stolen funds.
See: How Permissioned DeFi Will Transform Global Payments
- Despite several large-scale hacks, such as the incidents involving Euler Finance flash loan attack and Curve Finance liquidity pool hack, there was overall decrease in median loss per DeFi hack by 7.4%
- Further, a 17.2% reduction in the number of DeFi-specific hacks suggest an improvement in security protocols and a heightened awareness of cybersecurity needs within the DeFi space.
DeFi Hack Types
As DeFi platforms continue to grow in popularity and complexity, they become attractive targets for cybercriminals. According to insights from Halborn, a security firm specializing in blockchain and web3 solutions, DeFi attack vectors can be broadly classified into two categories: on-chain and off-chain.
See: Consultation: OSC Wants to Increase Fees for Crypto Firms
On-chain attacks are those that exploit vulnerabilities in the blockchain components of a DeFi protocol, such as smart contracts. These do not stem from the blockchain technology itself but from the way DeFi protocols are implemented on the blockchain.
- Protocol Exploitation: This involves exploiting vulnerabilities in a protocol's blockchain components, such as validator nodes, the protocol’s virtual machine, or the mining layer.
- Contagion: This occurs when an attacker exploits vulnerabilities created by a hack in another protocol, including hacks closely related to other protocols.
- Price Manipulation Hack: This type of attack exploits smart contract vulnerabilities or flawed oracles that do not reflect accurate asset prices, allowing attackers to manipulate digital token prices.
- Smart Contract Exploitation: Attackers exploit vulnerabilities in smart contract code, granting them direct access to control mechanisms of a protocol and token transfers.
- Governance Attacks: These attacks involve manipulating a blockchain project with a decentralized governance structure by gaining enough influence or voting rights to enact malicious proposals.
See: CFTC Publishes DeFi Report for Policymakers and Industry
Off-chain attacks exploit vulnerabilities outside the blockchain, such as in the systems or processes that interact with the blockchain.
- Insider Attack: This occurs when someone inside the protocol, like a rogue developer, uses privileged information or keys to steal funds.
- Phishing: Attackers trick users into signing permissions by impersonating a legitimate protocol, allowing them to spend tokens on the users’ behalf or trick users into sending funds to malicious smart contracts.
- Compromised Server: An attacker compromises a server owned by a protocol, disrupting its normal workflow or gaining knowledge to further exploit the protocol.
- Wallet Hack: This involves exploiting a protocol that provides custodial/wallet services, subsequently acquiring information about the wallets' operation.
- Compromised Private Key: Attackers gain access to a user’s private key through leaks or failures in off-chain software.
- Third-Party Compromised: An attacker gains access to an off-chain third-party program used by a protocol, which can later be used for an exploit.
Looking Ahead
The decline in stolen crypto funds and advancements in DeFi security practices offer hope for a more secure future. However, the rise in hacking incidents and the sophistication of attacks present ongoing challenges that the crypto industry must address.
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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OSFI’s New Security and Integrity Guideline 2024
OSFI | Release | Feb 2, 2024
Image by rawpixel.com on Freepik
The Office of the Superintendent of Financial Institutions (OSFI) announced the release of its final Integrity and Security Guideline on January 31, 2024.
This guideline, developed after public consultation from October 13 to November 24, 2023, aims to strengthen the resilience of financial institutions against threats, including foreign interference, by outlining clear expectations for integrity and security practices.
Who is this guidance for? Banks, Cooperative Credit Associations, Foreign Bank Branches, Foreign Insurance Branches, Life Insurance and Fraternal Companies, Property and Casualty Companies, Trust and Loan Companies.
"Whether financial services firms/fintechs are regulated by OSFI or not, they should comply. It is the right thing to do."
Highlighting the importance of financial institutions acting with integrity and ensuring security, Superintendent Peter Routledge emphasized that these measures are crucial for maintaining trust in Canada's financial system.
See:
Consultation Until Sep 20, 2023: OSFI Proposes New Guidelines for Crypto-Asset Exposures in Canada
OSFI’s Evolving Focus on Integrity & Security
Consultation: OSFI Unveils Guidelines for Robust Financial System
This step is part of OSFI's expanded mandate, supported by new legislation, and complements existing guidance to help institutions enhance their stability and security.
Peter Routledge, Superintendent of Financial Institutions:
“Resilience and trust in the financial system depend upon the integrity and security of financial institutions. Contained within our integrity and security guideline are specific, practical measures that we expect financial institutions to implement for their protection. Though much work remains, this guideline serves as an important, initial step towards enhancing integrity and security in the financial system.”
Download the 'Sound Business and Financial Practices' Guideline --> here
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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