Dispute shows how decentralized finance is being pulled into the regulated system, says lawyer
Adapting to a changing environment
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
Ottawa to review Crypto, Stablecoins and CBDCs; Budget promises more financial cops
Investment Executive | James Langton | Apr 8, 2022
In yesterday’s budget, the federal government announced plans to launch a new authority, the Canada Financial Crimes Agency, which it envisions as the future lead law enforcement agency in the fight against financial crime.
Alongside the launch of a new federal policing unit, the budget also pledged increased funding — $89.9 million over five years, and $8.8 million annually after that — to beef up the existing AML agency, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). This represents a 24% increase to FINTRAC’s budget, and provisions for a 13% increase in staff.
See: Lex Fridman Podcast with Brett Johnson: US Most Wanted Cybercriminal
Government in the budget said:
“This increased capacity will enable FINTRAC to implement new anti-money laundering and anti-terrorist financing requirements for crowdfunding platforms and payment service providers; support the supervision of federally regulated financial institutions; continue to build expertise related to virtual currency; modernize its compliance functions; and update its financial management, human resources, intelligence, and disaster recovery systems.”
It’s also already working on legislative changes to strengthen the existing AML legislation, the Criminal Code, and other legislation, “to enhance the ability of authorities to detect, deter, investigate, and prosecute financial crimes,” the budget said; while also enabling the government to tackle emerging threats that may not be covered under the existing regime.
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Investment Executive | James Langton | Apr 7, 2022
Ottawa to review crypto, CBDC: A new review of financial sector legislation will examine the emergence of cryptocurrencies and other digital assets, and the implications for the financial system.
In today federal budget, the government announced plans for a review, led by the Department of Finance, which will examine the so-called “digitalization” of money and its possible impact on the traditional financial sector. The budget pledged $17.7 million in funding over five years to finance a review that will, among other things, consider the need for a central bank digital currency (CBDC) in Canada.
See: Carolyn Wilkins: to achieve benefits, crypto must be made as safe as Canada’s financial system
A number of countries are exploring the potential of CBDCs, with the idea that their development could enhance payment systems, foster financial innovation and improve inclusion, while potentially reducing credit and liquidity risk. However, there also concerns that the introduction of CBDCs could undermine bank deposits, which are a traditional source of bank funding; while also cutting into banks’ revenues from payments processing. The government said that the review will also consider how to adapt the financial sector’s regulatory framework to deal with the risks posed by the digitalization of money; and, how to maintain the security and stability of the financial sector amid the development of these emerging technologies.
“The first phase of the review will be directed at digital currencies, including cryptocurrencies and stablecoins,” the government said in today’s budget.
Bank dispute resolution overhaul
The budget also reiterated the federal government’s pledge to amend financial sector legislation to overhaul the banking sector’s dispute resolution regime.
See: Decentralized Finance—Risks, Regulation, and the Road Ahead
Specifically, the government indicated that it will introduce amendments to “provide for a single, non-profit external complaints handling body (ECB) in banking and to strengthen the ECB system.”
“Canadians deserve a fair and impartial process to address unresolved complaints with their banks,” the government said in today’s budget. “Banks should not be able to choose the complaints handling body they participate in, and the system should not be run on a for-profit basis.”
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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, 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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Alleged US$16 million crypto theft case to test ‘Code is law’ defence in Canada
Canadian Lawyer | Aidan Macnab | Mar 17, 2022
Dispute shows how decentralized finance is being pulled into the regulated system, says lawyer
An action involving the alleged theft of around US$16 million in cryptocurrency will be the first in Canada, if it is heard on its merits, to address the “Code is law defence,” says the lawyer for the plaintiff.
Benjamin Bathgate, a partner in white-collar defence, fraud and investigations at McMillan LLP, is acting for Cicada 137 LLC, which obtained a precedent-setting Anton Piller order, also known as a civil search warrant. The court assigned Cicada the missing digital assets and their litigation and recovery rights. It seeks several court orders against a nineteen-year-old from Hamilton, Ont. named Andean Medjedovic.
See: Blockchain Vulnerabilities, Forensics And Legal Challenges
According to Bathgate, Cicada 137’s case against Medjedovic will be the first legal test of the “code is law” theory, a popular ethos among some computer programmers concerning how law applies to the digital world. According to the ethos, a programmed code is the law. If the code includes a vulnerability, which can be exploited – for example, to take possession of another person’s crypto – the existence of that vulnerability makes lawful any action which can be achieved through its manipulation.
“Some people in online communities suggest ‘Code is Law’ is a complete answer to anyone seeking legal remedies against those perpetrating cyberattacks or code exploits,” says Bathgate. “Others see it as a meaningless cloak for bad actors looking to carrying out theft and fraud against digital assets.”
“We believe the latter holds true, and if our case goes to trial, it would be the first reported case to test the defence of ‘Code is Law.’”
The case is also Canada’s first, and among the first worldwide, dealing with attacks against blockchain smart contracts and interactions between users on decentralized-finance trading platforms, he says. Bathgate is acting for Cicada 137 with the help of McMillan colleagues Reuben Rothstein, Joseph Osborne and Madeline Klimek.
See: UK Law Commission confirms Smart contracts are legally sound
Cicada 137 claims Medjedovic stole the crypto on Oct. 14, 2021, from the Indexed Finance System, which runs on the Ethereum blockchain. The Indexed Finance System is “a way of buying and holding several kinds of virtual currency through a single virtual currency, like a mutual fund that has many stocks in it,” said an expert report submitted on behalf of the plaintiff and written by Addison Cameron-Huff, a Toronto lawyer focussed on the law surrounding blockchain.
The plaintiff’s notice of action states that “post-theft investigative steps” led the principals of the Indexed Finance System to “an elaborate series of usernames, addresses, Internet posts, accounts and transactions,” all pointing to Medjedovic as the culprit. Medjedovic also took credit in a Twitter post, said the plaintiff.
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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, 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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Lex Fridman Podcast with Brett Johnson: US Most Wanted Cybercriminal
Lex Fridman Podcast | Mar 27, 2022
Brett Johnson was a US Most Wanted cybercriminal, called the Original Internet Godfather by US Secret Service for building the first organized cybercrime community called ShadowCrew, which was the precursor to today's darknet and darknet markets.
OUTLINE:
0:00 - Introduction
3:15 - Early years
37:32 - Phishing and social engineering
55:36 - SolarWinds cyberattack
1:01:23 - Future social engineering fears
1:04:04 - Early cybercrimes
1:16:38 - Cybercrime entrepreneurship
1:20:06 - ShadowCrew
1:51:10 - Dark web
1:59:56 - ShadowCrew arrested
2:11:55 - Cybercrime
2:17:02 - Love
2:49:06 - Prison
3:17:18 - Life after prison
3:39:06 - Advice for young people
3:40:30 - Hope for the future
3:43:59 - Meaning of life
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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, 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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Hacker steals $625 million from Ronin blockchain NFT game Axie Infinity
The Verge | | Mar 29, 2022
Roughly $625 million worth of cryptocurrency has been stolen from Ronin, the blockchain underlying popular crypto game Axie Infinity. Ronin and Axie Infinity operator Sky Mavis revealed the breach on Tuesday and froze transactions on the Ronin bridge, which allows depositing and withdrawing funds from the company’s blockchain.
Sky Mavis says it’s working with law enforcement to recover 173,600 Ethereum (currently worth around $600 million) and 25.5 million USDC (a cryptocurrency pegged to the US dollar) from the culprit, who withdrew it from the network on March 23rd. The attack focused on the bridge to Sky Mavis’ Ronin blockchain, an intermediary between Axie Infinity and other cryptocurrency blockchains like Ethereum.
See: How someone used a flash loan and loose airdrop to claim $1.1 million APE tokens
According to Sky Mavis, an attacker used hacked private security keys to compromise the network nodes that validate transfers to and from the Ronin blockchain. That let the attacker quietly withdraw large quantities of Ethereum and USDC. The transfer was discovered today — nearly a week later — when another user attempted to withdraw 5,000 Ethereum through the bridge.
“As we’ve witnessed, Ronin is not immune to exploitation and this attack has reinforced the importance of prioritizing security, remaining vigilant, and mitigating all threats,” the company said in its announcement. “We know trust needs to be earned and are using every resource at our disposal to deploy the most sophisticated security measures and processes to prevent future attacks.”
See:
Wormhole Portal Exploit: Hackers Steal Nearly $320 Million of Wrapped ETH
Crypto.com $34 million stolen in user account hack | Data Breach Lessons
CipherTrace August 2021 Crypto Crime Report: Crypto Fraud Dips as DeFi Hacks Grow
According to Sky Mavis, the Ronin attack was possible partly because of a shortcut the company had taken to relieve an “immense user load” on its network in November of last year — months after the game exploded in popularity in the Philippines and other countries where players relied on it as a full-time job. The system was discontinued in December, but the permissions that allowed it were never revoked.
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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, 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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Why Blockchain analytics are catching Washington’s attention
Protocol | Benjamin Pimentel | Mar 16, 2022
In warning against the use of crypto by Russian oligarchs to evade war sanctions, Senate Democrats led by Elizabeth Warren cited data tools familiar to Wall Street and Silicon Valley but still obscure in Washington circles.
The senators, in a letter to the Treasury Department, pointed to the work of Elliptic and Chainalysis, whose programs scour billions of blockchain accounts and transactions in a global hunt for illicit transactions and hidden assets.
See: SEC Inks Deal With Blockchain Analytics Firm AnChain.AI to Monitor DeFi Transactions
The Ukraine war is giving new urgency to the already brewing battle over crypto regulations. And it has turned the spotlight on blockchain analytics as a key way to unmask the inner workings of crypto, particularly the way funds and assets are moved and stored in blockchain networks designed to be transparent but quasi-anonymous.
Chris DePow, a senior adviser for financial institution regulation and compliance at Elliptic:
“There has been a steady uptick in the demand for blockchain analytics services, with a particular spike in interest over the past month or so. The potential for the use of crypto for sanctions evasion … underscored the need for the implementation of adequate crypto transaction monitoring, wallet screening, forensics and crypto service provider due diligence.”
Blockchain analytics sprang from a need to crack down on bad actors when Mt. Gox, the crypto exchange, was hacked in 2014, the year Chainalysis launched. Eventually, the field began to attract the interest of law enforcement agencies as crypto increasingly became associated with money laundering and other crimes.
See: Department of Justice Publishes Cryptocurrency Enforcement Framework: “We see criminals using cryptocurrency to try to prevent us from following the money”
The Department of Homeland Security was the first major customer of Blockchain Intelligence Group, said Lance Morginn:
“Criminals are in the business of running and law enforcement is in the business of waiting — and waiting for them to slip up. Crypto may be “a pseudo-anonymous space,” he added. “But mistakes happen and then they can reveal who that person is by going to a choke point.”
The arrest of Ilya Lichtenstein and Heather Morgan on charges of laundering billions of dollars, for example, was unraveled in part by tracing a transaction on the blockchain from a wallet to a service used to buy a prepaid Walmart gift card.
Crypto’s rapid growth over the past few years led to more interest from other entities. These included big banks which, Morginn said, realized
“that if [banks] don't start today, they're going to be left behind and the Coinbases are going to become the new digital banks and threaten their existing business model.”
Blockchain analytics also drew more attention with the heightened focus on regulation and the need to comply with anti-money-laundering and KYC rules.
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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, 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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90% of IT Managed Service Providers Experienced a Successful Cyber-Attack (in the Past 18 months)
Info Security | James Coker | Mar 10, 2022
Adapting to a changing environment
IT managed services providers (MSPs) have faced extraordinary challenges during the pandemic. In many cases, they have carried the burden of responsibility for ensuring their customers have been able to continue to operate in the face of an uncertain and constantly changing business environment. At the same time, they have also had to adapt in order to continue to operate and survive.
Nine in 10 (90%) managed service providers (MSPs) experienced a successful cyber-attack in the past 18 months, according to new research by N-able. More than four-fifths (82%) of MSPs reported seeing attacks on their customers rise in the past 18 months, preventing an average of 18 attacks per month.
See: U.S. CISA Agency warns of potential increase in Cyber threats
The research reflected the views of 500 senior decision-makers at MSPs about their security experiences both before the pandemic and today.
Dave MacKinnon, chief security officer at N-able, commented: “MSPs have worked tirelessly throughout the pandemic to ensure that the businesses they support can stay online and connected as circumstances changed. But the cyber-criminals they’re protecting against are working equally as hard to make use of these shifts against their targets. MSPs need to understand how the threat landscape continues to evolve and make the changes needed to protect both their customers and themselves and make the most of the enormous opportunity that enhancing security provides.”
Over half of respondents experienced financial loss and business disruption following an attack. At the same time, 46% said they had lost business, 45% suffered reputational effects and 28% saw their customers suffer a loss of trust.
See: Fintech Cybersecurity Best Practices
The most common attack methods detected by MSPs were phishing (75%), DDoS (56%) and ransomware (42%).
Attachs on MSPs are on the rise. SMEs are increasing their security budgets.
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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, 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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U.S. CISA Agency warns of potential increase in Cyber threats
Radical Compliance | | Feb 23, 2022
The United States’ top cybersecurity regulator published a special bulletin this week listing numerous measures companies should implement immediately to ward off possible attacks from Russia during its Ukraine invasion.
CISA, the Cybersecurity Infrastructure and Security Agency, issued the bulletin on Tuesday in conjunction with the Department of Homeland Security. Both agencies stressed that they have no evidence of any specific cyber attacks Russia might be planning, but “we are mindful of the potential for the Russian government to consider escalating its destabilizing actions in ways that may impact others outside of Ukraine.”
See: 4 Tips for high growth fintechs looking to do compliance right
In other words — head in the game, people! Corporations around the world need to prepare now for any distractions or disruptions Vladimir Putin might cause abroad while he tries to take over Ukraine.
Steps to Reduce the Chance of an Intrusion
- Confirm that all remote access to the organization’s network, as well as privileged or administrative access even within the network, requires multi-factor authentication.
- Assure that software is up to date, prioritizing updates that address known exploited vulnerabilities identified by CISA.
- Confirm that IT personnel have disabled all ports and protocols that aren’t essential for business purposes.
- If the organization is using cloud services, assure that IT personnel have reviewed and implemented strong controls. (CISA has guidance on this if you need it.)
See:
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Fintech Cybersecurity Best Practices
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World Economic Forum (WEF) Warns of Cyberattack that will Collapse Existing Financial System
Steps to Detect Potential Intrusions Quickly
- Assure that IT personnel are focused on identifying and assessing any unexpected or unusual network behavior. Enable logging to better investigate issues or events.
- Confirm that the company’s entire network is protected by antivirus and anti-malware software, and that signatures in these tools are updated.
- If you work with Ukrainian organizations, take extra care to monitor, inspect, and isolate traffic from those organizations; closely review access controls for that traffic.
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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, 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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