Your next CUBE RegNews will be published on May 2nd.
CFTC imposes record fine
The Commodity Futures Trading Commission (CFTC) has announced that it has obtained a default judgment and permanent injunction against Cornelius Johannes Steynberg, the founder and CEO of Mirror Trading International Proprietary Limited (MTI), a South African company in liquidation.
Steynberg has been ordered to pay $1,733,838,372 in restitution to defrauded victims and a civil monetary penalty of the same amount, which is the highest civil monetary penalty ordered in any CFTC case.
The CFTC has also permanently banned Steynberg from engaging in conduct that violates the Commodity Exchange Act, registering with the CFTC, and trading in any CFTC-regulated markets. The CFTC alleges that Steynberg engaged in an international fraudulent multilevel marketing scheme to solicit Bitcoin from members of the public for participation in an unregistered commodity pool operated by MTI. The CFTC has warned that orders requiring payment of funds to victims may not result in the recovery of any money lost because wrongdoers may not have sufficient funds or assets.
FinCEN update to Committee on Financial Services
FInCEN (Financial Crimes Enforcement Network) Acting Director Himamauli Das has been updating the US House of Representatives Committee on Financial Services on three priority areas:
Data protection: Das confirmed that FInCEN is updating its standard operating procedures across a number of aspects of Bank Secrecy Act access and information-sharing regime, and is undertaking an extensive effort to update the MOUs (Memorandum of Understanding) that govern that access
Feedback loops and the roadmap for an effective, risk-based AML/CFT framework: Das stressed the need to make the current AML/CFT framework more effective and risk-based, “looking for ways to strengthen feedback loops — meeting with financial institutions to determine what feedback they find most useful in understanding the value of the reports they file with FinCEN and convening FinCEN Exchanges to bring financial institutions together with law enforcement and national security agencies to discuss priority threats and emerging illicit finance typologies”.
Enforcement and accountability: Das referenced the new Office of the Whistleblower, adding that new rules are now being drafted to allow the implementation of the whistleblower program. He noted that: “Ultimately, FinCEN anticipates that the whistleblower office will receive numerous whistleblower tips per month, which will require FinCEN to employ resources to evaluate tips, investigate potential violations, and adjudicate whistleblower award applications following a successful enforcement action based upon whistleblower information.”
Das went on to outline several FinCEN successes including:
- Countering Russian aggression;
- combating ransomware attacks; and
- compliance in the cryptocurrency industry and fostering responsible innovation.
SEC fines for penny stock fraud
The District Court for the District of Massachusetts has issued final judgments against Trends Investments Inc., Leslie Greyling, and Brandon Rossetti, who were charged by the SEC for defrauding investors in private offers and sales of shares of two publicly traded penny stock companies.
The SEC alleged that Greyling and Rossetti lied to investors about whether Trends owned and could deliver the shares it claimed to be selling, and made various misrepresentations to keep investor funds, obtain further investments, and avoid detection. Rossetti was also charged with acting as an unregistered broker-dealer. The judgments ban Trends, Greyling, and Rossetti from violating anti-fraud provisions and imposed penny stock bars, while also ordering disgorgement, prejudgment interest, and civil penalties.
Clinton Greyling consented to a permanent injunction and penny stock bar without admitting or denying the allegations. Litigation continues against Roger Bendelac and Thomas Capellini.
Man charged in $110 million cryptocurrency scheme
Avraham Eisenberg, a 27-year-old man from Puerto Rico, is set to appear in court in Manhattan to face charges of commodities fraud, commodities market manipulation, and wire fraud in connection with the manipulation of the Mango Markets decentralized cryptocurrency exchange. According to court documents, Eisenberg fraudulently obtained around $110 million worth of cryptocurrency from the exchange and its customers by artificially manipulating the price of certain perpetual futures contracts. He was previously arrested in San Juan, Puerto Rico, and ordered to be detained. The National Cryptocurrency Enforcement Team (NCET) is investigating the case with assistance from Homeland Security Investigations and IRS Criminal Investigation, while the Commodity Futures Trading Commission and the Securities and Exchange Commission have initiated parallel civil proceedings.
PRA issues CP8/23 amending PRA rules
The Prudential Regulation Authority (PRA) has published CP8/23. The changes proposed in the CP would
- amend the PRA’s approach to fulfilling its obligation to publish technical information (TI) necessary for the valuation of insurance liabilities for each relevant currency;
- insert the definition of ‘participating Solvency II undertaking’ in the Group Supervision Part of the PRA Rulebook;
- update the definition of ‘accounting principles’ in the Glossary of the PRA Rulebook; and
- correct the reference number of the form used to notify the PRA of an auditor appointment in the Auditors Part of the PRA Rulebook.
The consultation closes on Thursday 22 June 2023.
FCA reminds firms of consumer duty obligations
In a speech to the Credit Summit 2023, Roma Pearson, Director of Consumer Finance at the FCA highlighted a number of areas UK firms should be focusing on now to prepare for the implementation of the new consumer duty regime.
Pearson said firms should:
- “share the relevant information necessary to comply with the Duty with commercial partners and make sure they are on board. This will likely include distribution networks and wholesalers as well as retailers and relevant third parties.
- focus on the areas that will have the biggest impact on outcomes for customers. Ask yourself the obvious question: is the product or service designed to deliver good outcomes for consumers?
- make sure you have clearly identified your target market and consumers understand your communications.
- ensure that any lingering sludge practices are addressed – practices that deter customers from taking action in their interests, such as making a complaint or switching to another product or provider; or any unreasonable additional costs such as punitive exit fees are removed.”
The consumer duty regime comes into force on 31 July 2023 for new and existing products or services that are open to sale or renewal.
A selected summary of key developments for regulated financial institutions
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