Who Bears the Loss When a Cybercrimal Diverts Funds?

The Issue

What happens when two innocent parties to a settlement agreement are victims of cybercrime resulting in settlement funds being misdirected to a fraudster? The recent Ontario Small Claims Court decision St. Lawrence Test & Inspection Co. Ltd v. Lanark Leeds Distribution Ltd. And Mark Schokking, 2019 CanLII 69697 (ON SCSM) (“St. Lawrence“) considered this issue. As Kelford, DJ succinctly states:

The Plaintiff and Defendant were both innocent victims of a “cybercrime” which resulted in the loss of funds which were paid by the Defendants to settle the Plaintiff’s claim. Both parties are innocent. Unfortunately, one of them must bear the loss.

Read More

No Pressing Need For Central Bank-issued Digital Currencies

Readers may remember the Spring and Summer of 2018 as the heady days of the Initial Coin Offering (“ICO”) boom. With money seemingly printed out of thin air, there appeared to be a token for every occasion. Then, as quickly as it had arrived, the boom seemed to evaporate, taking with it the billions of dollars companies had raised.

But this blog post isn’t about the fast and furious world of crypto-trading and investing. It’s about the staid and steady world of central banking, where central bankers carry on controlling money supply and conducting monetary policy. And giving speeches to other central bankers – including a March 22nd speech by Agustin Carstens (General Manager, Bank for International Settlements[1]) to the Central Bank of Ireland.

Read More

Securities regulators provide guidance on coin and token offerings

On June 11, 2018, the Canadian Securities Administrators (CSA) released CSA Staff Notice 46-308 – Securities Law Implications for Offerings of Tokens (Notice) providing guidance on the applicability of securities laws to offerings of coins or tokens, including those commonly referred to as “utility tokens”.1

While the tone of the Notice suggests that the CSA considers most crypto-coins and tokens to be securities, it includes guidance as to when they might constitute mere utility tokens not subject to securities laws. This note discusses and provides context on the key points in the Notice, including:

  1. The existing “investment contract” analysis will often guide regulators in determining whether an offering involves a security, i.e., they will ask whether it entails an investment of money in a common enterprise, with profits significantly attributable to the efforts of others.
Read More

Competition Bureau releases draft FinTech recommendations for policymakers

On November 6, 2017, the Competition Bureau (the “Bureau”) published its report on the Canadian financial services sector and FinTech. The report examined a wide range of FinTech activities and focused heavily on retail payments and retail payments systems.

The Bureau observed that, while FinTech has a real potential to penetrate the retail payments space in meaningful ways, it identified a variety of barriers to entry, some attributable to regulation, and some not.

Those barriers not attributable to regulation include:

  • Canadian consumer behaviour (including a high degree of trust in existing payment providers and methods) and market maturity.
  • The impact of network effects and the need for economies of scale: a critical mass of users is required for a new retail payment system or method to gain acceptance in a market.
Read More