BIS on the future of money
In a speech in Singapore, Agustín Carstens, General Manager of the BIS addressed the role of central banks in the future of money debate. Addressing the role of central bank digital currencies, Carstens said “CBDCs and tokenised deposits do not represent new types of money. Instead, they replicate existing forms of money in a technologically superior way. CBDCs, for example, will play the role that central bank money plays in today’s system. Tokenised deposits will play the role of commercial bank money.”
Fed, FDIC and CFTC warn of crypto liquidity risk
The Board of Governors of the Federal Reserve System (Federal Reserve), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) have issued a joint statement on the liquidity risks presented by certain sources of funding from cryptoasset-related entities. The statement reminds banking organizations to apply existing risk management principles and to monitor the liquidity risks inherent in funding sources from cryptoasset related entities and establish and maintain effective risk management and controls commensurate with the level of liquidity risks from such funding sources.
SEC charges African Gold Acquisition Corp. with internal controls, reporting, and recordkeeping failures
The Securities and Exchange Commission (SEC) has charged African Gold Acquisition Corp, a publicly traded special purpose acquisition company (SPAC), for internal controls, reporting, and recordkeeping violations which enabled African Gold’s former chief financial officer to misappropriate approximately $1.2 million from the company’s operating bank account. As a result, African Gold made materially false filings with the Commission and maintained inaccurate books and records.
“This settled order with African Gold demonstrates that SPACs must comply with basic Exchange Act requirements, just like any other publicly traded company,” said John T. Dugan, Associate Director for Enforcement in the SEC’s Boston Regional Office. “The fact that African Gold did not discover the misappropriation of its funds for more than a year, when certain vendors refused to provide further services due to unpaid invoices, clearly indicates that the company neglected to comply with basic internal control requirements.”
CFTC charges unregistered commodity trading advisor with fraud, misappropriation, and unregistered commodity pool operator with misappropriation
The Commodity Futures Trading Commission (CFTC) has filed a civil enforcement action Richard “Rick” Miller and his company, Flip 2 Futures Trading Company LLC (F2F) charging Miller and F2F with fraud, misappropriation, and unregistered activity related to trading on behalf of a commodity pool run by Justin Dendinger and Punch Drunk Marketing LLC (PDM).
Allegedly Dendinger and PDM pooled investor funds in accounts in their names and transferred the funds to F2F and Miller for trading. Between July 2019 and November 2020, F2F acted as an unregistered commodity trading advisory (CTA) by soliciting funds from and engaging in discretionary trading on behalf of PDM. Miller acted as an unregistered associated person (AP) of F2F.
F2F and Miller are also charged with:
- illegally collecting funds from the pooled investment vehicle in F2F’s or Miller’s bank and trading accounts,
- failing to provide a required disclosure document to PDM, and
- failing to maintain required records.
PDM and Dendinger are also charged with
- illegally commingling pool participant funds with the funds of PDM and Dendinger and
- failing to provide pool participants with required disclosure documents.
Dendinger, individually, is charged with making false or misleading statements of a material fact to the CFTC.
The CFTC complaint further alleges PDM and Dendinger solicited and accepted $400,000 from nine pool participants residing in Minnesota and Wisconsin. Finally, the complaint alleges that in response to a records subpoena and in response to a CFTC staff letter, Dendinger, via his attorney, falsely stated he had no trading accounts in his name with a registered futures commission merchant and had not engaged in any trading of specified financial products.
CoinEx sued by NY AG
New York Attorney General, Letitia James, has accused the cryptocurrency exchange of transacting business illegally because it falsely represented itself as an exchange by failing to register as a securities and commodities broker-dealer in the state..
James accuses CoinEx of having “engaged in repeated and persistent fraudulent practices” and having violated the Martin Act, one of the toughest anti-fraud acts in the NY state.
Huge rise in US card skimming
US card skimming grew nearly 500% in 2022 and is showing signs it is still growing, according to a recent analysis by credit scoring services firm FICO. The firm’s data identified more than 161,000 compromised cards last year, or roughly five times the number reported in 2021. Card skimming is a criminal practice designed to retrieve customer payment details stored in the magnetic stripe and the chip of a bank card and transfer it to a fake card, or directly use it for fraudulent transactions. Often criminals use various devices, known as skimmers, to steal the data. This can be carried out when making transactions at an ATM or paying at a point-of-sale (POS) terminal that has been tampered with beforehand.
A selected summary of key developments for regulated financial institutions
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