Focus Of SEC’s Cyber Unit, Including Blockchain

The US Securities and Exchange Commission has clarified the role of the new Cyber Unit within its Enforcement Division.

Two recent announcements from the US Securities and Exchange Commission (SEC) provide insight into how the Commission’s new Cyber Unit will conduct itself. The two statements were delivered four days apart and provide some of the most telling information about the unit’s direction.

While delivering the Securities Enforcement Forum 2017 keynote from the Mayflower Hotel in Washington, DC, newly appointed SEC Division of Enforcement Co-Director Stephanie Avakian stated, “We do think there is more we can do to align our resources with two of our key priorities – specifically retail and cyber.” She continued, “To be sure, we have long focused resources in both of these areas, but we think that some structural change and strategic focus will enable us to better fulfill our investor protection mission.” Avakian had prefaced her statements by saying these views were her own and not necessarily those of the SEC. 

Avakian also announced the creation of the Retail Strategy Task Force, which will examine how investors interact with the securities market and what risks they might encounter from bad actors therein. Additionally, the task force will develop ways to educate investors, empowering them to make more informed decisions.

Avakian then turned her focus to the Cyber Unit:

“The need for the Cyber Unit arises in large part from the increasing frequency with which we are seeing cyber-related misconduct affecting the securities markets, and also the increasing complexity of these cases. These cybersecurity threats come from a wide range of sources, including foreign and domestic hackers, traders and others who traffic in stolen market-moving information, prospective market manipulators, state-sponsored actors, and others. The work of these actors in many instances has been facilitated by easy access to the dark web marketplace as well as the use of digital currency, both of which make it harder to track the flow of funds involved in cyber violations.”

According to Avakian, the three areas that the Cyber Unit has the most potential to improve are:

  • Hacking to access material, nonpublic information in order to trade in advance of some announcement or event, or to manipulate the market for a particular security or group of securities.
  • Account intrusions in order to conduct manipulative trading using hacked brokerage accounts.
  •  Disseminating false information through electronic publication, such as SEC EDGAR filings and social media in order to manipulate stock prices.

 Avakian noted that the Division of Enforcement already has “a substantial amount of expertise” in cyber-related cases, remarking that they have previously been handled by the Market Abuse Unit, among others. However, she believes it would be beneficial to aggregate the work on these cases to a dedicated unit, as cyber enforcement is so technically intensive and the threat “is so serious.”

In addition, Avakian discussed the need to police blockchain activities. “For some of the same reasons, we are also including within the responsibility of the Cyber Unit our focus on the distributed ledger technology space … The emerging issues presented by blockchain technology warrant a consistent, thoughtful approach – and the best way to do that is to centralize the expertise and the focus in a single unit.”

These statements were reinforced on October 30, when the SEC announced it was bringing charges against Joseph Willner, a Philadelphia-area day trader. Willner is accused of generating at least $700,000 in illicit profits after making unauthorized trades from the brokerage accounts of more than 100 victims, influencing the stock prices of several companies. Key to this case is Willner’s use of bitcoin to transfer the proceeds. Avakian commented on the investigation:

Account takeovers are an increasingly significant threat to retail investors, and it is exactly the type of fraud our new Cyber Unit is focusing on. We are committing substantial resources to combating cyber-based threats to protect investors and our markets from intruders who manipulate the system for their own illicit gain.”

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The NAU platform presents a revolutionary method for attracting clients in retail!

The NAU platform is getting ready for it’s presale. This platform will directly connect retailers and their clients under the win-win conditions for both parties. The removal of middlemen, as well as the viral effect, will allow retailers to attract buyers in a more efficient and affordable way compared to other marketing channels. Additionally, buyers will not only receive benefits from utilizing the special offers that the platform has to provide but will also gain rewards for referring new users to NAU.

Attracting clients is one of the most critical tasks for any business. Currently, there is a variety of marketing instruments the effectiveness of which varies.

● Mass commercials which eat up budgets while providing results that are difficult to measure, such as radio and TV advertisements.

● Social media, contextual, and targeted ads can provide excellent results; however, they require a significant amount of resources. Specialists and services need to be paid, while the continually growing competition forces individuals to spend more and more.

● CPA model, in which a retailer pays for acquiring clients, is considered to be one of the most advantageous forms of advertising since payments only need to be made based on the pay-per-action basis. Such as a purchase or order in a restaurant. It is quite easy to calculate expenses and establish a price that is favorable. However, there is no any single global platform out there that could attract clients based on CPA models through online or offline methods.

● Websites providing discount coupons. At first, these sites were appealing; however, everything came to the point where retailers were forced to make discounts that became unacceptably large, and had to pay additional commissions to service providers and middlemen. Ultimately, business owners were not only cut off from earnings but actually lost money. This led to a drop in the popularity of coupon services.

As a result of all of the aforementioned events, a severe problem has formed. Un the current reality, intermediaries cut the biggest part of the marketing budget while the costs of acquiring new clients for retailers becomes ridiculous. At the same time, service users don’t have any serious motivation to attract new clients for retailers, due to lack of fairly rewarding programs. This is precisely why not a single form of marketing can produce a desirable viral effect.

The idea of discounts and bonuses is an excellent attraction for the potential buyers, a CPA model is one of the most effective ways of attracting new clients for retailers. It is quite evident that the market seeks an universal platform, that would combine all of these marketing methodologies in a cost efficient manner.

The goal of the NAU platform is to create a new marketing reality, reimagining the idea of coupons:

● The platform establishes a direct connection between customers and retailers, eliminating middlemen that were suffocating the CPA approach.
● Creates motivation for clients to attract their friends and acquaintances to the platform independently.
● Guarantees full transparency, security, and trust for all of the platform’s users with the help of the Blockchain technology.

Examples of the NAU platform in use

1. An advertiser creates a motivational offer for potential buyers (discount, gift, free second item) and pays a minimum of 1 NAU token for each new client that that redeems the offer.

2. The published offer can be found via the platform’s website or through the mobile app. A search map based on geolocation or catalog made up of 5 base groups with filters can be used to find offers.

3. A registered user can send an invite to their acquaintances so that they can also enjoy fruitful offers.

4. The referred individuals gain access to the platform and can then make use of bonuses and retailer offerings.

5. A user that has referred someone new to the platform will receive 95% of the payment established by the advertiser. This kind of approach motivates users to refer people in their surrounding to the platform actively, which generates a viral effect and increases the speed of platform’s community growth.

6. The NAU platform gets a 5% commission from each payment made by a user and 0.5% from each transaction involving wallets. Additionally, advertisers and their agents can buy notifications for their target segments and other marketing instruments using tokens on the platform.

Ultimately, a platform that connects retailers and users directly by unique offers and win-win scenarios for everyone involved will be created. Retailers can raise their sales without having to overpay for advertisements, while their clients can use special offers and gain rewards for referrals. Blockchain technology will be utilized to provide security and trust within the platform.

Why is it beneficial to invest in NAU tokens?

1. Retailers will use NAU tokens to make payments for clients acquisitions. Additionally, it is planned that tokens will be used by clients to pay for retailer merchandise in the future.

2. The users themselves will be able to attract referrals, which will help the NAU platform grow fast.

3. In the future there will be no additional tokens released, so this, coupled with the growth of the platform, will presumably lead to a steady token value increase.

4. The marketing of the platform will be continuously executed, this includes listing of NAU tokens on various exchange markets, advertising and event marketing, which will contribute to the platform’s growth.

The NAU token pre-ICO will take place from the 31st October to the 4th of November.
The Hard Cap of this round is set at 50 million tokens.
The token price during the presale will be: 1 NAU = $0.04 with a 35% bonus.

The ICO will take place from the 10th of November to the 17th of December.
Hard Cap: 300 million tokens.
Price of a token during the ICO: 1 NAU = $0.04 – $0.06 depending on the round.

There will only be 1 billion NAU tokens available for sale.
Additional tokens will be released as follows: 45 million tokens for advisors and marketing; +24% of sold tokens will go to NAU founders, these tokens will be locked for 30 months.

Projects Website:
White Paper:

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ETHNews Exclusive: JP Morgan’s Umar Farooq On The Interbank Information Network


JP Morgan has announced the launch of the IIN. The initiative utilizes blockchain technology in order to reduce the friction associated with global payments.

JP Morgan is working with the Royal Bank of Canada (RBC) as well as Australia and New Zealand Banking Group Limited (ANZ) to develop and test a new use case for blockchain technology. The Interbank Information Network (IIN) will increase the speed and security of payments. To better understand the ramifications of the IIN and how it works with JP Morgan’s permissioned version of Ethereum, Quorum, ETHNews spoke with Umar Farooq, head of channels, analytics, and innovation for treasury services and blockchain initiatives at JP Morgan.

 “Quorum is our platform for developing blockchain applications,” said Farooq. “It’s built by using the Ethereum code base. We very explicitly chose Ethereum because of how big the community is and the depth of knowledge in that community, with regard to programming. Quorum has existed for a while now. It’s been open-source for a while and we continue to add more functionality to that core platform … We wanted to start relatively limited and with partners with which we have lots of transaction volumes going back and forth,” Farooq said, referring to JP Morgan’s partnerships with RBC and ANZ, “so we can test the network appropriately.”

“Our blockchain strategy is very focused on making sure that we don’t have a technology looking for a problem. We start with the problem and then find the appropriate technology. In some cases, like this one, blockchain is actually an ideal technology, given the construct, the cryptography, and the smart contracts that you can build into it. In many other cases, maybe the solution is still a centralized database. We start at a client-centric point of view, going to a problem we are trying to solve, and finding the appropriate technology. In cases like this, blockchain pops up as the right one.”

The processing of global payments can, at times, be an extremely arduous task with layer upon layer of complexity. The communication between parties transacting together sometimes requires unnecessarily high levels of bureaucratic verification, especially when the transaction is crossing international borders that have various legal stipulations. “The real pain point that happens for a client is when one of these payments gets flagged for information,” Farooq told ETHNews. “It could be because of some screen that we have or rule that we have, or one of the many lists that we have to check names against to make sure that we’re not [facilitating transactions] for someone who’s sanctioned by any of the different legal regimes that we operate under.”

The IIN is not a network for value to be exchanged, per se. Rather, it is an information network that enables similar assurances to the know your customer (KYC) requirements that banks must follow. “The value is still moving on the standard rails … This is just attacking the information part,” said Farooq. “It can be compared to [KYC] but the reason I wouldn’t call it [KYC] is because [KYC] is a significant term [already] and involves a lot of information that we collect on a customer up front when we onboard them. It is definitely in the same realm. We are confirming …  that the person is the right person and they are not flagged or involved in fraud or sanctions or any of those things. All it does is actually make the current system more efficient in terms of information sharing. So it’s an information network, not a value network, so to speak.”

JP Morgan is ideally suited to develop this kind of a blockchain-based technology, transacting “somewhere around four or five trillion [USD] a night in total clearing volume.” Many times, as payments are going from the payer to payee, there are multiple banks in any given transaction pipeline. Should any of those banks have a “red flag” issue with a transacting entity’s information, associated delays can be time-consuming and costly. Farooq said, “If that happens, we basically have to get … all of that entity’ information in addition to what we [already] have … Right now, that process across banks is quite inefficient. You have multiple banks involved in the network. They are going back and forth. A lot of this work is via emails and faxes and phones. You may end up going back and forth across multiple banks to get literally one piece of information, like a date of birth … Blockchain is actually quite an ideal way to tackle this problem. It obviously allows you to connect in a fully distributed way and uses encryption, so data can be protected.”

With the IIN, JP Morgan is bringing disparate transactions together and putting them on a distributed network. Should a payment get flagged by any bank along the pipeline, that bank doesn’t have to go through the entire pipeline to get the information it needs. Rather, they can send encrypted messages via the IIN to get the information directly. “Instead of multiple hops, you can reduce it to one hop,” said Farooq. “You can reduce it in a way [that] it’s fully encrypted so data is safe. In our implementation of Quorum, we only store hashes on the blockchain itself. We don’t actually store the core data, which means that you’re not actually storing data that’s confidential and in some cases sensitive. Only the parties involved in the transaction know the data …  It’s the same thing we do today in terms of data privacy but it makes the process significantly more efficient. Instead of taking what could be several days … we can reduce this to a matter of minutes or hours.”

The IIN is a distributed application built on the Quorum blockchain. “It’s actually using our existing Quorum constructs as well as our existing smart contract constructs to build this particular application. At this point, we haven’t done anything beyond the technical capabilities of Quorum. As we go from our current state to a fully rolled out state in a few months, we are testing it with two of our large peers, [RBC] as well as ANZ. As we test it amongst the three of us and then decide how to scale it, it’s very possible that we will end up extending certain parts of our platform, which we would then go back and contribute to the open-source community if appropriate.”

Farooq concluded by saying, “I’ve been involved in blockchain for a very long [time], almost the entirety of our program. The really gratifying part is that we’ve now made the transition from literally just being involved in [proofs-of-concept] and initial pilots … Now we are approaching it from the point of view of our clients … Now we are looking at actual products we will build using the technology.”

ETHNews will be following JP Morgan’s development of the IIN and how the new blockchain technology is reshaping the global payments landscape.  

Jordan Daniell is a writer living in Los Angeles. He brings a decade of business intelligence experience, researching emerging technologies, to bear in reporting on blockchain and Ethereum developments. He is passionate about blockchain technologies and believes they will fundamentally shape the future. Jordan is a full-time staff writer for ETHNews.

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Boston Fed VP: DLT Could ‘Fundamentally Change’ Financial Industry

Jim Cunha, senior vice president of the Federal Reserve Bank of Boston, has said that distributed ledger technology (DLT) could “fundamentally change” many areas of financial services.

In an article on the Boston Fed’s website, Cunha spelled out that innovations using the technology might bring advantages in payments and beyond, saying.

“DLT has the potential to fundamentally change many areas of financial services, payments being just one. Change is also very possible in securities (sales and post trade processing), derivatives, trade finance, and supply chain to name a few.”

The Fed has been exploring cryptocurrencies since 2011, and DLT for the past four years, according to Cunha. “We want to understand how [DLT] can impact the payment industry, since our mission is to ensure the efficiency, safety, and accessibility of payments in the U.S.,” Cunha noted.

However, while there are applications of DLT in the cross-border payments space, most work in that area is occurring outside the U.S, he said, adding: “So I think there is more potential for change there, but who knows what the future holds back home.”

Cunha, who helps run one of the 12 branches that make up the U.S. Federal Reserve central banking system, continued to explain that the institution has been testing various technologies in the field of payments. And while new technologies, such as data analytics, AI and machine learning, are already disrupting aspects of the financial ecosystem, it is important to find the “right business case,” he said.

Earlier this month, Cunha told a fintech conference hosted by the Federal Reserve Bank of Philadelphia that blockchain technology will “wake up Swift and other middlemen”. He further described the Fed’s initiative to educate monetary policymakers, payments experts and regulatory specialists on the risks and potentials of blockchain technology.

Jim Cunha Image from CoinDesk archive 

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