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On 9 October 2024, the U.S. Securities and Exchange Commission (SEC) filed a complaint against ZM Quant Investment Ltd., Baijun Ou, and Ruiqi Lau, in the United States District Court for the District of Massachusetts, alleging market manipulation of crypto assets and demanding a jury trial. In its complaint, the US SEC alleges that ZM Quant Investment Ltd. and its principals, Baijun Ou and Ruiqi Lau, manipulated crypto asset markets by artificially inflating the price and trading volume of various tokens. According to the SEC, these actions misled investors and created the illusion of robust market activity, while in reality, ZM Quant was engaging in wash trading and other manipulative practices. The SEC's complaint further outlines how ZM Quant's actions harmed market integrity and defrauded investors. The SEC seeks permanent injunctions, disgorgement of profits, civil penalties, and a ban on the defendants' participation in the securities markets, excluding personal trading. From...

On October 9, 2024, the United States’ Securities and Exchange Commission (US SEC) filed a complaint against CLS Global FZC LLC and Andrey Zhorzhes, in the United States District Court for the District of Massachusetts, alleging a complex market manipulation scheme involving cryptocurrency assets. The SEC claims that CLS Global, which presents itself as a "market maker" for crypto assets, was, in fact, engaging in deceptive practices designed to artificially inflate the trading volume and prices of its clients' crypto assets, thereby misleading investors. Central to this case is the allegation that between August 23, 2024, and September 18, 2024, CLS Global conducted manipulative trades on the Uniswap platform, generating $595,000 in artificial trading volume for a crypto asset known as NexFundAI, which accounted for 98% of the total trading activity during that period. The lawsuit details how CLS Global advertised its services as offering advanced trading algorithms and...

On 25 September 2024, the South Korean Financial Services Commission (SK FSC) announced its authorization of the digital asset industry’s plan to create the Digital Asset Protection Foundation, an entity aimed at safeguarding users’ assets in the event of virtual asset service providers shutting down. This initiative, led by the Digital Asset Exchange Association (DAXA) aims to move toward protecting virtual asset users’ rights and maintaining stability in the market. The foundation will be responsible for receiving, managing, and securely returning users’ assets that were previously held by defunct exchange service providers after a structured consultation process. The establishment of this foundation comes in response to growing concerns about the ability of VASPs to return users’ assets following business closures. Despite previous efforts by financial authorities, such as issuing guidelines for VASP closures and conducting inspections on closed exchanges, the lengthy and complex...

On 4 October 2024, the Monetary Authority of Singapore (MAS) publishes a Consultation Paper on Proposed Regulatory Approach, Regulations and Notices for Digital Token Service Providers issued under the Financial Services and Markets Act 2022 outlining the proposed regulatory framework for Digital Token Service Providers (DTSPs). This new consultation paper is issued under the Singapore’s Financial Services and Markets Act 2022 (FSM Act) which aims to ensure proper regulation of DTSPs providing services from or within the Singapore to customers inside and outside the country. The public is invited to provide feedback on these proposals, with submissions open until 4 November 2024. The consultation paper introduces amendments to regulate the activities of DTSPs focusing on their operations abroad to prevent risks related to money laundering and terrorism financing, which are heightened in cross-border digital services. The consultation paper mandates the DTSPs to apply for a license...

On 2 October 2024, Hong Kong Virtual Asset Exchange (HKVAX) officially announced that it had obtained Type 1 (dealing in securities) and Type 7 (providing automated trading services) licenses from the Hong Kong’s Securities and Futures Commission (HK SFC), along with a license under the Hong Kong’s Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). This development makes HKVAX the third regulated virtual asset platform in Hong Kong, joining the ranks of HashKey Group and OSL, which are currently the only operators permitted to serve retail customers in the territory. HKVAX was established with a strong focus on combining traditional financial services with blockchain technology, providing a wide array of virtual asset services. These include over-the-counter (OTC) trading, a 24/7 trading platform, and asset custody with advanced security features such as multi-signature technology and wallet separation. The platform has a particular emphasis on Security Token...

On 4 October 2024, the United States’ Commodity Futures Trading Commission (CFTC), through its Office of Customer Education and Outreach (OCEO), announced two upcoming events in observance of World Investor Week. These events are scheduled for 8 October 2024 and 9 October 2024 which aim to educate and spread awareness with the public on critical issues related to fraud protection, with a focus on emerging scams involving digital assets like cryptocurrency. World Investor Week is an international initiative organized by the International Organization of Securities Commissions (IOSCO) to raise awareness about the importance of investor education and protection. From October 7 to 13, organizations from over 100 jurisdictions will come together to highlight pressing issues in investment, particularly around digital and technological advancements, crypto assets, and sustainable finance. With the rapid growth of digital and crypto assets, fraudulent schemes have evolved, increasingly...

On 4 October 2024, the Singapore’s Inter-Ministerial Committee (IMC) issued its report, presenting the findings and recommendations following a comprehensive review of Singapore’s Anti-Money Laundering framework. The report discusses in detail the areas of the AML system, assesses its effectiveness, and proposes improvements to strengthen Singapore’s stance against money laundering activities which aim to align Singapore’s regulatory measures with global best practices and ensure that the framework remains effective and responsive in emerging financial threats. In background of this on 15 August 2023, the Monetary Authority of Singapore, in collaboration with government bodies such as the Singapore’s Ministry of Finance, Singapore’s Ministry of Home Affairs, Singapore’s Ministry of Law, and the Singapore’s Immigration and Checkpoints Authority, took steps to dismantle the money laundering network. This joint operation led to the arrest of ten individuals and the seizure of more than...

On 6 September 2024, the UAE Cabinet issued Cabinet Decision No. 100 of 2024, significantly amending the Federal Decree-Law No. 8 of 2017 on Value Added Tax. This announcement introduced amendments specifically addressing the VAT treatment of virtual assets and other financial services. These changes are designed to clarify how businesses should approach the taxation of digital assets, such as cryptocurrencies, as the UAE continues to adapt its tax laws to the evolving digital economy. The new rules are scheduled to come into effect on 15 November 2024, and businesses involved with virtual assets must ensure they comply with these updated regulations to avoid penalties. Under the previous VAT framework, the treatment of virtual assets, including cryptocurrencies and other digital tokens, was not clearly defined. This ambiguity led to varying interpretations and inconsistencies in VAT reporting for businesses dealing with virtual currencies. With the Cabinet Decision No. 100 of 2024,...

On 2 October 2024, the UK Financial Conduct Authority (UK FCA) issued a final notice for a fine of £28,959,426 imposed on Starling Bank Limited for failings in its financial crime controls, particularly relating to anti-money laundering (AML) and financial sanctions screening. The FCA’s investigation revealed deficiencies in Starling's financial sanctions screening processes and its breach of an agreement to restrict account openings for high-risk customers. Starling Bank, a digital challenger bank, saw rapid growth, expanding from 43,000 customers in 2017 to over 3.6 million in 2023. However, as its customer base expanded, the bank's financial crime controls failed to keep up. In 2021, the UK FCA conducted a review of financial crime controls across challenger banks and found concerns with Starling’s anti-money laundering and sanctions screening framework. As a result of these findings, Starling agreed to a requirement from the UK FCA not to open accounts for high-risk customers...

On 2 October 2024, U.S. District Judge John A. Mendez by its order issued a preliminary injunction against California’s newly enacted law, Assembly Bill 2839 (AB 2839), which sought to regulate the use of AI-generated deepfakes in elections. The law, signed by Governor Gavin Newsom on 17 September 2024, allowed individuals to sue for damages if AI-generated content resembling a political candidate was posted within 120 days before and 60 days after an election. This law targeted media that was deemed "materially deceptive" and harmful to the integrity of electoral processes. The case that led to this ruling began in July 2024, when Christopher Kohls, a content creator known for his political satire under the alias "Mr. Reagan," released an AI-manipulated video mocking Vice President Kamala Harris. The video, widely circulated and shared by notable figures, including Elon Musk, generated widespread attention across social media platforms. Following this, concerns arose about the...