SEC freezes assets and obtains restraining order against crypto fraudsters
The Securities and Exchange Commission (SEC) has taken action against Digital Licensing Inc, also known as DEBT Box, and four of its principals, along with 13 other defendants. The SEC has obtained a temporary asset freeze, restraining order, and other emergency relief in response to a fraudulent scheme involving the sale of crypto asset securities to hundreds of US investors. The scheme allegedly raised approximately $50 million, as well as unspecified amounts of bitcoin and ether.
The SEC’s complaint reveals that the defendants have been involved in an ongoing scheme since March 2021 to sell unregistered securities they referred to as “node licenses.” Through hundreds of online videos, social media posts, and investor events, the defendants lured investors by promising that the node licenses would generate various crypto asset tokens through crypto mining activity. They also claimed that these tokens would experience significant gains due to revenue-generating businesses operating in diverse sectors.
However, the SEC’s investigation uncovered that the node licenses were a deception to conceal the fact that DEBT Box instantaneously created the total supply of each token using code on a blockchain. In essence, the alleged scheme involved falsely presenting the tokens as a result of legitimate crypto mining activities to attract investors seeking substantial returns.
The charges filed against the defendants include engaging in unregistered securities offerings under Sections 5(a) and 5(c) of the Securities Act of 1933. Additionally, charges have been laid of violating the antifraud provisions of the federal securities laws found in Section 17(a) of the Securities Act and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934.
MAS announces major investment
The Monetary Authority of Singapore (MAS) has announced that it will commit up to S$150 million during the next three years under the renewed Financial Sector Technology and Innovation Scheme which seeks to accelerate and strengthen innovation by supporting projects that involve the use of cutting-edge technologies. The scheme will be investing in, amongst other areas, artificial intelligence and data analytics and ESG fintech solutions.
SEC confirms new cyber risk rules
The Securities and Exchange Commission (SEC) has announced new rules to enhance and standardise disclosures regarding cybersecurity risk management, strategy, governance, and incidents by public companies that are subject to the reporting requirements of the Securities Exchange Act of 1934. As part of the changes, amendments are also being adopted to Reg S-K; Reg S-T and the Securities Act of 1933.
The new rules take effect from 5th September 2023.
FCA writes to Principal Trading Firms to remind them of risks
The Financial Conduct Authority has written to the CEOs of Principal Trading Firms (PCFs) to remind them of the risks inherent in PCF businesses and to outline the regulator’s forthcoming supervisory focus. The Regulator will focus on:
- Algorithmic trading controls
- Financial resilience
- Avoiding market disruption arising from commodity market volatility
- Operational resilience
- Brexit impacts
The letter also notes that the regulator is expecting to consult on a review of the transparency regime for bonds and derivatives. I conclusion, the letter states: “Senior Manager Function-holders (SMFs) and other senior management within your firm are … responsible for ensuring their respective areas of oversight and control are fully aware of the FCA’s expectations and are compliant and fully resourced.”
OFAC updates Mali sanctions
The Office of Foreign Assets Control (OFAC) has confirmed it has adopted a final rule amending and replacing the Mali Sanctions Regulations, published in abbreviated form on 7th February 7 2020, to further implement a 26th July 2019 Mali-related Executive order and provide a more comprehensive set of regulations. Because of the number of regulatory sections being updated or added, OFAC is reissuing the Regulations in their entirety.
A selected summary of key developments for regulated financial institutions
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