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Category Archives: Cyber Security, Hacks, Fraud Alerts, Risks

US Subcommittee on Covid Releases Staff Report: How Certain Fintechs Facilitated Fraud in the Paycheck Protection Program

US House Subcommittee on Covid | Release | Dec 1, 2022

Fintechs and covid payments fraud investigation - US Subcommittee on Covid Releases Staff Report:  How Certain Fintechs Facilitated Fraud in the Paycheck Protection ProgramToday, the Select Subcommittee on the Coronavirus Crisis, chaired by Rep. James E. Clyburn, released a staff report detailing the poor performance of many financial technology companies (fintechs) in administering the nation’s largest pandemic relief program, the Paycheck Protection Program (PPP)—may have themselves committed PPP fraud

  • In May 2021, the Select Subcommittee initiated an investigation into the role of fintech companies Kabbage, Inc. and Bluevine and partner banks Cross River Bank and Celtic Bank in facilitating PPP fraud following public reports they were linked to disproportionate numbers of fraudulent loans. The investigation was expanded in November 2021 to include fintech start-ups Blueacorn PPP, LLC, and Womply, Inc., after an analysis determined significant percentages of PPP loans facilitated by the companies had indicators of fraud.
    • The investigation was expanded in November 2021 to include fintech start-ups Blueacorn PPP, LLC, and Womply, Inc., after an analysis determined significant percentages of PPP loans facilitated by the companies had indicators of fraud.

See:  Consumer Protection: Fintech Complaints Have Been Rising

Chairman Clyburn released the following statement about today’s report:

“As today’s report details, many fintechs, while promising to help disburse billions of Paycheck Protection Program dollars to struggling small businesses efficiently and expeditiously, refused to take adequate steps to detect and prevent fraud despite their clear responsibility to safeguard taxpayer funds. Even as these companies failed in their administration of the program, they nonetheless accrued massive profits from program administration fees, much of which was pocketed by the companies’ owners and executives. On top of the windfall obtained by enabling others to engage in PPP fraud, some of these individuals may have augmented their ill-gotten gains by engaging in PPP fraud themselves.

“We must learn from this inexcusable misconduct to erect guardrails that will help ensure that federal programs—including emergency assistance programs in future crises—are administered more effectively, efficiently, and equitably while keeping waste, fraud, and abuse to an absolute minimum. Based on our initial findings, I have asked the SBA and SBA OIG to conduct further investigation into these companies and pursue all appropriate remedies, and I have informed DOJ that some of our findings may warrant its attention.”

See:  UK Alternative Lenders Funding Delivery Performance to Small Businesses During COVID

  • Today’s staff report is entitled “‘We Are Not the Fraud Police’: How Fintechs Facilitated Fraud in the Paycheck Protection Program” and is available in full here.   The report reveals the following key findings: Fintechs and Lenders Observed Significant Fraud in the PPP, Which They Attributed to Program Mismanagement as They Sought to Evade Responsibility
    • Blueacorn Took Only Minimal Steps to Prevent Fraud in Its Facilitation of Billions of Dollars in PPP Loans, While Abusing the Program to Enrich Its Owners
    • Womply’s PPP Fraud Screenings Failed to Prevent “Rampant Fraud”—and Were Accompanied by Questionable Business Practices—Despite Generating Over a Billion in Profits
    • Capital Plus, Harvest, and Other Fintech-Partnered Lenders Conducted Little Oversight over Womply and Blueacorn’s Activities, Allowing Fraud to Infiltrate The PPP
    • Kabbage’s PPP Activities Illustrate that the PPP Lacked Incentives for Fintechs to Implement Strong Fraud Prevention Controls or Appropriate Borrower Servicing
    • Bluevine Initially Faced Significant Fraud Rates, but Its Longstanding Partners Intervened to Improve Fraud Prevention Over the Course of the Program
  • Based on the findings, the report includes 11 recommendations to address PPP fraud and improve future programs.
    • It urges the SBA to consider carefully whether businesses like fintechs that are not subject to traditional financial regulations should be permitted to play a part in future federal lending programs, and recommends that Congress take these factors into account in considering future legislation.

View the original release --> here

Download the 130 page PDF full Staff Report --> here


NCFA Jan 2018 resize - US Subcommittee on Covid Releases Staff Report:  How Certain Fintechs Facilitated Fraud in the Paycheck Protection ProgramThe 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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NYT DealBook Summit: Sam Bankman-Fried Interviewed About the Collapse of FTX

New York Times | Dec 1, 2022

SBF interviewed at NYT DealBook Summit - NYT DealBook Summit:  Sam Bankman-Fried Interviewed About the Collapse of FTX

Image: NYT DealBook Summit

Sam Bankman-Fried, co-founder of the cryptocurrency firm FTX, gave his first live interview since his company filed for bankruptcy. Andrew Ross-Sorkin of The New York Times asked Bankman-Fried to address allegations of fraud and mismanagement and whether the people and organizations who are owed money will get any of it back.

 

 

Watch the full interview from the DealBook Summit event.


NCFA Jan 2018 resize - NYT DealBook Summit:  Sam Bankman-Fried Interviewed About the Collapse of FTXThe 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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Audio Interviews (post-bankruptcy) with Sam Bankman-Fried on FTX Collapse

Coindesk | Sam Kessler, Nelson Wang | Nov 29, 2022

Phone interviews with SBF post bankruptcy - Audio Interviews (post-bankruptcy) with Sam Bankman-Fried on FTX Collapse

Image: youtube

Among the more unprecedented elements of the FTX saga has been the fact that Bankman-Fried, who was raised by two lawyers, can’t seem to keep his mouth shut despite mounting legal threats.

Sam Bankman-Fried’s crypto empire blew up in spectacular fashion at the beginning of this month, and questions continue to swirl around the motives and mechanics that caused crypto exchange FTX and its sister company, Alameda Research, to collapse.

See:  CB Insights: FTX ‘Bagholders’ — Investments and M&A Portfolio Map

After cryptic tweet threads and a viral DM exchange with a Vox reporter in which he said “f**k regulators” and admitted that his philanthropic identity was largely manufactured for PR reasons, Bankman-Fried’s actual voice is being heard for the first time post-FTX collapse with newly released audio from Tiffany Fong – a crypto investor-turned-whistleblower who initially gained attention for leaking audio that showed Celsius Network, the now-bankrupt crypto lending platform, planned to use a cynical “crypto-based solution” to repay users of its Earn Lending platform.

First audio interviews with SBF post-bankruptcy

First interview with Tiffany Fong

In this phone call interview, Sam Bankman-Fried or SBF, former CEO and founder of FTX, chats with me about filing for Chapter 11 bankruptcy, the alleged backdoor, the use of FTT as collateral, ties to the Democratic Party, laundering Ukraine money, the solvency / insolvency of FTX US, lawyers, and the jurisdictional battle ahead as well as his next steps forward.

See:  CFTC Says Bitcoin is the Only Commodity | ECB Criticizes Digital Asset Sector for Facilitating Illegal Activity

Second interview with Tiffany Fong

SBF Talks FTX user funds on Alameda, $8 billion hole illiquidity, CZ, the run on the bank. Sam Bankman-Fried shows remorse

Continue to the full article --> here


NCFA Jan 2018 resize - Audio Interviews (post-bankruptcy) with Sam Bankman-Fried on FTX CollapseThe 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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Coinsquare Announces Data Security Breach to Customers

Finance Magnates | Arnab Shome  | Nov 28, 2022

Data breach hack - Coinsquare Announces Data Security Breach to CustomersCoinsquare has become the latest victim of a security breach that has resulted in compromised users' personal details, the platform confirmed last weekend by sending an email to its customers.

  • Data Breach: The exchange detailed that the breach exposed "customer names, email addresses, residential addresses, phone numbers, dates of birth, device IDs, public wallet addresses, transaction history, and account balances."
    • However, the crypto exchange reported some "unusual activity on our platform" on November 19 and underwent unscheduled maintenance. Then, the exchange did not detail if it was a security breach. It also restored full service on Friday ahead of sending emails to costumes about the security breach.
    • Risk: A breach of personal information can also result in more severe individual account targeting. These generally make identity theft and fraud much more accessible. A similar data breach of Australian telecom service provider Optus earlier this year prompted the country's financial market watchdog to warn financial brokers of the rising risks of identity theft.

See:  Suspected Sanctions Breach? The UK Forces Crypto Exchanges to Immediately Report

  • Coinsquare's response: "No passwords were exposed. We have no evidence any of this information was viewed by the bad actor," the email stated, adding: "We note that your assets have always been, and remain, secure in cold storage and are not at risk."
    • The Canadian exchange cautioned the users to change their passwords and enable two-factor authentication (2FA) to ensure safety
    • Coinsquare touts itself to be "Canada's trusted platform to securely buy, sell and trade Bitcoin, Ethereum, and more" and received registration from the Investment Industry Regulatory Organization of Canada (IIROC) a month before.

Continue to the full article --> here


NCFA Jan 2018 resize - Coinsquare Announces Data Security Breach to CustomersThe 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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Big 6 Banks’ say ‘Hole in Financial System’ | Role in Freeland’s Convoy Plan

Canada Today | Naomi Oliver | Nov 25, 2022

Pexels Mohamed Almari hole in system - Big 6 Banks’ say 'Hole in Financial System' | Role in Freeland’s Convoy Plan

Image: Pexels/Mohamed Almari

When Deputy Prime Minister Chrystia Freeland called the chief executive officers of Canada’s Big Six banks on Sunday in February before their government invoked the Emergencies Act, the CEOs stressed that the resources at their disposal were to support that to choke off the money pouring in from the convoy protests were limited.

  • Accounts of at least three calls Ms Freeland made with bank CEOs over an eight-day period are contained in summaries dubbed “readouts” and in Ms Freeland’s handwritten notes from the meetings, which took place Thursday at the Investigating the Use of the Emergency Law.
  • At that moment, banks needed court orders to freeze funds, CEOs said, which are slow to grant. To give banks the ability to freeze funds faster, the government needed to sanction protesters under the same financial crime laws it applies to terrorists, three [bank] CEOs said. They also called on the government to close loopholes in systems to monitor transactions by bringing a wider range of payment providers under stricter regulations.
  • Ms Freeland’s first assignment was an attempt to involve the banks in ending the convoy protests and get the bankers’ help in assessing the severity of the damage to Canada’s economy. Subsequent calls focused on working out the complex mechanisms to stop the flow of money to the protesters.
    • What the CEOs weren’t told on the first call on February 13 was that the government was preparing to use the emergency law to expand banks’ powers to freeze accounts.

See:  NCFA Response to FINTRAC’s ‘Knee Jerk’ Regulations Requiring Donation Crowdfunding Platforms to Register and Comply with AML/ATF Legislation

  • Bank CEOs:
    • TD’s Mr. Masrani stressed that “Canada’s reputation is at risk,” and was echoed minutes later by Canadian Imperial Bank of Commerce CEO Victor Dodig
    • BMO’s Mr White reportedly called the blockades “a national crisis”, urged Ms Freeland to “act immediately” and quoted a US investor who told him: “I will not invest another red cent in your banana republic in Canada”
  • Banks urge government: Prior to the Feb. 13 conference call, TD TD-T, CIBC CM-T and Bank of Nova Scotia BNS-T had privately encouraged the government to bring non-bank payment providers “more clearly” under existing anti-money laundering laws.
    • That day, Mr Masrani told Ms Freeland the “big hole” in the system was those payment providers, including crowdfunding platforms, and CIBC’s Mr Dodig was also pushing for measures that would cover “the entire financial system,” according to an ad. Another CEO added, “Let’s be clear, they will all eventually move to crypto.”

Continue to the full article --> here


NCFA Jan 2018 resize - Big 6 Banks’ say 'Hole in Financial System' | Role in Freeland’s Convoy PlanThe 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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Adapting IOSCO Principles to Digital Assets Markets

IOSCO | Nov 2, 2022

applying IOSCO principles to digital assets Singapore fintech festival 2022 - Adapting IOSCO Principles to Digital Assets MarketsThe International Organization of Securities Commissions (IOSCO) has published a speech by Tuang Lee, Chair of IOSCO Fintech Task Force, on applying and adapting IOSCO principles to digital asset markets.

  • Digital assets:  These refer to anything of value whose ownership is represented in a digital or computerised form, through a process called tokenisation. Broadly speaking, digital assets can refer to anything, including real assets like artwork and property, but today our primary focus is on crypto-assets and DeFi.
  • International scrutiny:  On a global level, the International Monetary Fund (IMF) and the Financial Stability Board (FSB) are calling for more regulation of this sector. The FSB recently published, on 11 October 2022, two consultation papers on the international regulation, supervision and oversight of crypto-assets activities and markets – from a financial stability perspective.

See:  Global Securities Wathdog IOSCO to Target Crypto Platforms

  • IOSCO Fintech task force: As the global standard setter for the international capital markets, IOSCO sets the core Objectives and Principles,1 along with supporting recommendations and guidance, on how to regulate capital markets activities and associated risks (together, IOSCO’s principles). Our members adopt these principles, distilling them into detailed regulations domestically.
    • IOSCO has the mandate and a clear  roadmap to explore investor protection and market integrity issues in financial markets.
    • We have established two workstreams under our roadmap. The first on “Crypto and Digital Assets” is led by the UK Financial Conduct Authority (UK FCA). The second, covering “DeFi Products and Services” is led by the US Securities and Exchange Commission (US SEC).

  • Examples of key risks:
    • We are seeing many instances of market manipulation, wash trading and insider trading. For instance, a platform employee may be aware of the potential listing of a certain coin and may use the information to invest in the coin and make a quick profit.
    • Another key risk concerns conflicts of interest. Conflicts of interest are particularly egregious in the context of crypto-asset service providers. Many of these so-called exchanges perform multiple roles that give rise to conflicts of interest. For example, trading platforms often provide brokerage services, custody and proprietary trading under a single roof – they also engage in the issuance of tokens, lending activities and complex re-hypothecation arrangements with client assets.

See:  CPMI and IOSCO publish final guidance for stablecoins

  • Like my last example on insider trading, there are existing IOSCO principles that already apply. The challenge is in determining the right level of guidance to provide. For instance, whether platforms should continue to be able to perform their own proprietary trading. Some jurisdictions have already proposed to disallow this. In addition, should platforms be allowed to list tokens which they have active interest in, and if so, what they need to disclose to users of their platforms?

Download a PDF copy of the Speech --> here


NCFA Jan 2018 resize - Adapting IOSCO Principles to Digital Assets MarketsThe 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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DOJ Arrests Two Estonians in $575 Million Crypto Money Laundering Scheme

DOJ | Release | Nov 21, 2022

Pexels Kindel Media Arrested man in handcuffs - DOJ Arrests Two Estonians in $575 Million Crypto Money Laundering Scheme

Image: Pexels/Kindel Media

Two Estonian citizens were arrested in Tallinn, Estonia, yesterday on an 18-count indictment for their alleged involvement in a $575 million cryptocurrency fraud and money laundering conspiracy.

  • According to court documents, Sergei Potapenko and Ivan Turõgin, both 37, allegedly defrauded hundreds of thousands of victims through a multi-faceted scheme. They induced victims to enter into fraudulent equipment rental contracts with the defendants’ cryptocurrency mining service called HashFlare. They also caused victims to invest in a virtual currency bank called Polybius Bank. In reality, Polybius was never actually a bank, and never paid out the promised dividends.
  • Victims paid more than $575 million to Potapenko and Turõgin’s companies. Potapenko and Turõgin then used shell companies to launder the fraud proceeds and to purchase real estate and luxury cars.

See:  Digital Asset Classification vs Wire Fraud: What’s the Most Powerful Law in Crypto Right Now

U.S. Attorney Nick Brown for the Western District of Washington:

The size and scope of the alleged scheme is truly astounding. These defendants capitalized on both the allure of cryptocurrency, and the mystery surrounding cryptocurrency mining, to commit an enormous Ponzi scheme. They lured investors with false representations and then paid early investors off with money from those who invested later. They tried to hide their ill-gotten gain in Estonian properties, luxury cars, and bank accounts and virtual currency wallets around the world. U.S. and Estonian authorities are working to seize and restrain these assets and take the profit out of these crimes.

Continue to the full article --> here


NCFA Jan 2018 resize - DOJ Arrests Two Estonians in $575 Million Crypto Money Laundering SchemeThe 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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