Innovation in Blockchain and Fintech
We are excited for 2022! We believe innovation in blockchain and fintech will not replace but improve traditional finance allowing for strides in sustainable governance with
- Increased stakeholder participation
- Increased operational efficiencies
- Smart tech to increase ROI on compliance & risk programs
We hope you continue to find the Warburton Report a helpful resource. Feedback is welcome so we continue to give you the content you find most helpful.
THE ENVIRONMENT
- Possible clarity of crypto from SEC
- Acceleration of mainstream global banks and traditional companies acquiring and merging with crypto firms and stablecoins
Cybersecurity and Data Privacy
Attacks reported by companies. Hack of personal info must be reported under US and EU requirements. bZx hack (ETHDenver); Akropolis hack; Coincheck hack (500 mil stolen); Kucoin hack (exchange & highlight of new controls)
SEC and Other Enforcement Actions
Registration Requirements – SEC Charged Ripple in December 2020 with operating $1.3B unregistered securities offering. The complaint alleges failure to register offerings and sales of digital assets or satisfaction of any exemption from registration. This is a case to watch in 2022.
Telegram settled with SEC after the Commission did not accept their defense that tokens was a private placement (Reg D) exemption. $18.5M penalty and $1.2M payment to investors.
Fraud and Cryptocurrency Investment Scams. Crypto scammers reportedly took $14B taken in 2021.
“Code is Law” Challenge –Pending Canadian $15.8M class action. Plaintiffs argue that “code is law” convention in DeFi does not provide immunity from securities laws.
Materially Misleading Statements. American CryptoFed DAO charged with materially misleading statements about tokens including employee benefit plan. Company filed registration statement with SEC. Class action lawsuit Anderson and Dolifka v. Tether, USDC (filed 12/20/21- pending) Plaintiffs allege Tether made misleading and deceptive statements concerning its backing and reserves.
YOUR COMPLIANCE & RISK PROGRAM
This month’s focus is on fraud prevention measures. As you consider training, operational controls and regulatory strategy, fraud prevention should be a critical priority. Consider whether your efforts are combating these risks to prevent fraud in your business and the broader ecosystem and protect you from regulatory and criminal liability by designing an adequate compliance program.
What are fraud risks?
- Your company or your strategic partner, service provider or agent including employees and consultants facilitates a fraud
- Insiders or trader digital assets based on non-public material info for their own benefit to detriment of public
- Your company is held accountable for consumer fraud or statements deemed to be materially misleading about the project and/or digital assets. i.e., Twitter and business development efforts
