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
Federal Judge Rules Against Terraform labs
Crypto | Jan 2, 2024
Image by Freepik
A New York judge has granted the SEC a summary judgment over the claim that Terraform sold unregistered securities
- Judge Jed Rakoff ruled that four crypto tokens offered by Terraform Labs, including UST and LUNA, wLUNA, and MIR were unregistered securities based on the Howey test, a Supreme Court precedent for defining investment contracts.
- Terraform Labs, during the crypto bull run of 2021, was a significant player in the crypto space, but faced a dramatic downfall with the collapse of UST in 2022. The SEC has sued Terraform Labs and co-founder Do Kwon in February 2023 for orchestrating a multibillion-dollar securities fraud.
- The jury trial is scheduled to begin in January 2024.
- The decision diverges from a separate ruling in the Southern District of New York regarding the XRP token.
Terraform Labs spokesperson in an email to The Block:
"We strongly disagree with the decision and do not believe that the UST stablecoin or the other tokens at issue are securities. Further, the SEC’s fraud claims are not supported by evidence, and we will continue to vigorously defend against those meritless allegations at trial."
Outlook
The divergence in legal interpretations between different courts, as seen in the Ripple case and now Terraform Labs, adds complexity to the regulatory environment for crypto assets. The Terraform Labs summary judgment strengthens the SEC's approach to treating certain crypto assets as securities, potentially setting a precedent for future cases.
See: Moody’s Analytics on Stablecoin Depegging
The case puts a spotlight on algorithmic stablecoins, a relatively new and complex type of crypto asset, and their regulatory treatment. The denial of summary judgment on fraud claims suggests a protracted legal battle ahead, with significant implications for Terraform Labs and its stakeholders and possible precedent that could shape the future of digital asset regulation. It is imperative for regulators, companies, and investors to engage in constructive dialogue to establish a regulatory framework that balances innovation with investor protection.
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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China Intensifies Cracksdown on Tether in Forex Trading
Crypto | Jan 2, 2024
Image: Unsplash/DrawKit Illustrations
Chinese authorities have intensified their crackdown on the use of cryptocurrencies, particularly Tether (USDT), in illegal foreign exchange trading
China's Supreme People's Procuratorate, in conjunction with the State Administration of Foreign Exchange, has issued a stern directive on Dec 27, 2023 against the use of Tether (USDT) as an intermediary in trading yuan with other fiat currencies.
See: China’s CBDC: Offline Digital Yuan Payments via Super SIM Cards
This crackdown is a continuation of China's stringent regulatory stance on cryptocurrencies, which includes a major ban on cryptocurrency activities like trading and mining imposed in 2021 and comes as part of China's ongoing efforts to mitigate financial risks and maintain control over its financial system.
The Focus on Tether
The Chinese authorities have declared the conversion of yuan to cryptocurrency and vice versa as illegal, including indirect involvement such as technical support or offering exchange services. This includes using cryptocurrencies as a medium to convert yuan into foreign currencies or the reverse. Tether, a stablecoin pegged to the US dollar, has been specifically targeted due to its role in facilitating illegal forex transactions.
Recent Cases
The prosecutor’s office cited several cases of illegal foreign exchange crime involving Tether. One notable case from 2019 involved a crypto trader who received over 22 million UAE dirhams (approximately US$6 million) from a Chinese gambling syndicate in Dubai and converted it to yuan using Tether. The trader was sentenced to seven years in jail and fined 2.3 million yuan (US$322,000).
Another case involved Zhao Dong, the founder of the over-the-counter crypto trading desk RenrenBit, who facilitated crypto and local currency trading using Tether. He was also jailed for seven years and fined a similar amount.
Outlook
Despite the ban, cryptocurrencies like Tether have remained popular in China, indicating the challenges in enforcing such regulations. Mainland China continues to be a significant market for cryptocurrencies, with underground traders often using them to exchange currencies and circumvent regulation.
See: What’s the latest surrounding USDT (Tether) risks about?
China's crackdown on the use of Tether in illegal forex trading is a clear indication of its commitment to controlling financial risks and illegal activities within its borders.
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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Ledger’s Hardware Wallet Exploited
Crypto | Dec 15, 2023
Image: Unsplah/Azamat E
A Wake-Up Call for Crypto Security. On December 14, Ledger's Connector Kit software was exploited.
Ledger, known for manufacturing physical cryptocurrency wallets resembling USB drives and other storage devices, was compromised affecting multiple Ethereum-based applications, including Zapper, SushiSwap, Phantom, Balancer, and Revoke.cash, due to a security breach in Ledger's system.
While the exact number of affected decentralized apps (dapps) and the total financial loss are still being assessed, anecdotal reports suggest widespread exploitation. Blockaid, a blockchain security firm, estimated losses of over $150,000 in crypto due to this unique “supply chain attack” on Ledger’s Connect Kit. Others reported the draining of over $600,000 from users' wallets.
See: Jamie Dimon Advises Government to ‘Close Down Crypto’
Ledger CEO Pascal Gauthier described the hack as an “isolated incident” and fixed the malicious code and promised stronger security controls. The exploit, which lasted less than two hours, was attributed to a phishing attack targeting a former employee. Ledger assured that their hardware and Ledger Live platform were not affected. They advised users to use the “Clear Sign” feature for transactions to ensure direct interaction with Ledger’s software.
FINAL TIMELINE AND UPDATE TO CUSTOMERS:
4:49pm CET:
Ledger Connect Kit genuine version 1.1.8 is being propagated now automatically. We recommend waiting 24 hours until using the Ledger Connect Kit again.
The investigation continues, here is the timeline of what we know about…
— Ledger (@Ledger) December 14, 2023
The crypto community's response, including assistance from entities like Tether and Chainalysis, highlights the collaborative effort in addressing such security breaches. These breaches not only affect individuals and projects but also tarnish the reputation of industry. Security expert Steve Gibson emphasized the need for skepticism in an industry with a history of significant hacks.
Moving On
The Ledger hack is a reminder of the ongoing challenges in ensuring the security of digital assets. Users are advised to exercise caution and stay informed about the security of their digital assets, especially when interacting with decentralized applications.
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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Ex-Binance CEO CZ Faces Up to 10 Years in Prison
Crypto | Nov 28, 2023
Image: Unsplash/Kanchanara
Ex-Binance CEO Changpeng Zhao Faces Up to 10 Years in Prison Amid Bank Secrecy Act Violations
Changpeng Zhao, the former CEO of cryptocurrency exchange Binance, is currently facing a potential prison sentence of up to 10 years. This development follows his guilty plea for violating the Bank Secrecy Act. The U.S. Department of Justice (DOJ) has expressed frustration over Zhao's permission to reside in the UAE until his sentencing, considering his billionaire status and the UAE's lack of an extradition treaty with the U.S.
See: SEC Files Lawsuit and Accuses Kraken of Commingling
Key Points
- Zhao has been charged by the DOJ for violating the Bank Secrecy Act, with the prosecution possibly arguing for a maximum 10-year term. This is a significant increase from the initially anticipated 12-18 month sentence.
- Binance has agreed to pay a massive $4.3 billion fine, marking one of the largest enforcement actions against a crypto platform. Zhao himself was personally fined $50 million.
- Attorneys for Zhao, a dual citizen of Canada and the UAE, submitted a motion last Thursday to the Western District of Washington in Seattle. They argued that Zhao is not a flight risk, emphasizing his voluntary appearance in court to enter a guilty plea to the charges.
- Despite his guilty plea, Zhao has been allowed to travel to and live in the UAE until his sentencing. This decision is contentious due to his wealth and the UAE's non-extradition status with the U.S.
See: UK Leading Charge in Global Crypto Tax Crackdown
Importance of the Case
This case is a landmark in terms of legal action against a major figure in crypto, highlighting the increasing scrutiny and regulatory actions in the industry, and importance of compliance with laws like the Bank Secrecy Act. This case could set a precedent for how legal systems worldwide handle similar situations in crypto.
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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CZ Pleads Guilty. Fined $4.3 Billion in DOJ Settlement
Crypto | Nov 23, 2023
Image by Racool_studio on Freepik
Changpeng Zhao, Binance CEO steps down following $4.3 billion settlement with U.S. regulatory agencies.
- Changpeng Zhao (CZ), the CEO of Binance, has stepped down and pleaded guilty (federal court in Seattle) to breaking U.S. anti-money laundering laws as part of a $4.3 billion settlement resolving a years-long probe into the world's largest crypto exchange.
- Binance broke U.S. anti-money laundering and sanctions laws and failed to report over 100,000 suspicious transactions, including those linked to terrorist groups and illegal activities.
- The settlement includes a $3.4 billion penalty to the Financial Crimes Enforcement Network (FinCEN) and $968 million to the Office of Foreign Assets Control (OFAC), along with compliance requirements and monitoring for five years.
See: SEC Files Charges Against Binance for Mishandling Funds and Deceiving Regulators
- Reuters reported the settlement includes a $1.81 billion payment within 15 months and a further $2.51 billion forfeiture.
- Zhao will personally pay $50 million as part of the settlement, which is described as one of the largest corporate penalties in U.S. history.
- Per Coindesk and details in a legal document, he is arranging a $15 million deposit in a trust managed by Davis Wright Tremaine, distinct from the bond amount. This is to ensure compliance with the conditions of his release, with an agreement to surrender these funds in case of any violation.
- Additionally, he is securing the backing of two guarantors, who are committing $250,000 and $100,000 each.
Today, I stepped down as CEO of Binance. Admittedly, it was not easy to let go emotionally. But I know it is the right thing to do. I made mistakes, and I must take responsibility. This is best for our community, for Binance, and for myself.
Binance is no longer a baby. It is…
— CZ 🔶 BNB (@cz_binance) November 21, 2023
"These resolutions acknowledge our company’s responsibility for historical, criminal compliance violations, and allow our company to turn the page" -- Binance statement
What's Next?
- The date for his sentencing has been set for February 23, 2024, at 9 a.m. Pacific Time.
- Zhao will remain the majority shareholder of Binance and will serve as a consultant on historical areas of the business.
- Richard Teng will succeed him as CEO.
See: SEC Files Lawsuit and Accuses Kraken of Commingling
- The case against Zhao and Binance highlights the increasing regulatory scrutiny on cryptocurrency exchanges globally. The settlement is seen as a significant step towards greater compliance and regulatory oversight in the crypto 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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Moody’s Analytics on Stablecoin Depegging
Stablecoins | Nov 14, 2023
Image: Unsplash/CoinWire Japan
Moody's Analytics reports 609 instances of large fiat-backed depeggings so far in 2023, launches digital asset monitor tracking system
In 2023, the cryptocurrency market has witnessed a significant number of depegging events among large-cap stablecoins. Depegging refers to the fluctuation of stablecoin prices by more than three percent in a day against their fiat pegs, highlighting the volatile nature of these digital assets.
Stablecoins play a crucial role in the cryptocurrency markets, accounting for about 10 percent of the crypto market and most on-chain activity. However, their instability, as evidenced by frequent depegging events, poses significant risks. These events can cause market panic, as seen in May 2022 when TerraUSD's peg against the USD shattered, leading to substantial losses in the crypto market.
Moody's Launches Digital Asset Monitor
In response to the growing need for risk assessment tools in the volatile stablecoin market, Moody's Analytics has launched the AI-enabled Digital Asset Monitor (DAM). This tool is designed to predict the probability of a stablecoin depegging from a fiat currency within a 24-hour time horizon. The launch version of DAM tracks 25 fiat-backed stablecoins, including Tether, USDC, and PayPal Coin, which represent over 92% of the total stablecoin market capitalization.
See: UK’s Future Crypto and Stablecoin Regulation
Moody's DAM provides real-time insights into various aspects of stablecoins, including market and liquidity dynamics, the stability of the issuer, the custodians holding the stablecoin's assets, and the quality of these reserves. The tool combines off-chain and on-chain risk factors, leveraging Moody's expertise in global integrated risk assessment.
The Future
Despite the challenges posed by depegging events, the stablecoin market continues to grow and evolve. With tools like Moody's DAM and increased transparency in the sector, there is potential for greater stability and reliability in stablecoins.
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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Zelle’s New Refund Policy Might Set New Standard
Payments | Nov 13, 2023
Image: Unsplash/Soliman Cifuentes
Zelle, a payment app owned by major banks including JPMorgan Chase and Bank of America, has recently begun refunding victims of imposter scams in response to pressure from U.S. lawmakers and consumer protection advocates.
Policy Change and Implications
Effective from June 30, this policy covers customers who were duped into sending money to scammers posing as legitimate entities. This move significantly exceeds the current legal and regulatory requirements, which mandate refunds only for unauthorized transactions, such as those made by hackers.
See: Bank CEOs Defend P2P Payments Network Zelle in Senate Hearing Over Consumer Fraud Handling
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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