In this module, we will highlight the many regulatory challenges that FinTech firms in all sectors face. I'll begin by offering up several cautionary tales, of what can happen when a FinTech firm fails to understand or comply with applicable laws and regulations, from there we will look at how the FinTech industry has evolved in the US in a relatively short period of time no doubt aided by massive investment inflows. Finally, we end the module by examining how new financial technology is forcing regulatory agencies to reassess the existing regulatory framework, and the steps at some of these agencies have taken to accommodate and better understand new innovations in financial services. Let's begin by taking a look at a few examples of what can happen when FinTech firms fail to comply with the applicable rules and regulation. My intention here is not to shame or single out these companies, but rather to emphasize the importance and necessity for FinTech firms to incorporate legal and regulatory considerations into their product design and decision-making from the very beginning. Doing so can save a lot of time, money and headache down the road. Our first examples are from the FinTech lending industry, in 2008, Online lending platform prosper which connects borrowers with lenders online, received a cease and desist order from the SEC,who stated that prosper was an unregistered seller of securities. The order arose from how prosper was funding their loans. Rather than have the lenders or investors buy the loans outright prosper was selling these investors notes whose payment stream depended on the borrower's making their loan payments on time and in whole. The SEC determined that these notes were tenably securities, that needed to be registered with the SEC and prosper subsequently did register with the SEC. More recently, in April 2018 Online lender Lending Club was fined $2 million by the Massachusetts Division of banks from making more than 46,000 loans in the state without a proper state license. The fine was related to a 2011 consent order, In which the division strip Lending Club's license for charging borrowers fees that violated Massachusetts small loan laws. Moving on to the role of payments. In 2015, paypal agreed to pay $7.7 million in a settlement with the Office of Foreign Assets Control which is US Department of the Treasury sanctions enforcement arm, for processing 486 illegal transactions, totaling approximately $44,000 that violated sanctions on Sudan, Cuba and Iran. There are numerous examples of cyptocurrency firms running afoul of the law regulations. In 2014, the founder of online bitcoin exchange Bitlnstant pled guilty to operating an unlicensed money transmitting business, through what he knowingly transmitted money intended to facilitate criminal activity. Specifically drug trafficking on Silk Road, which was a black market website designed to enable it users to buy and sell illegal drugs anonymously and beyond the reach of law enforcement. In 2015, the Commodity Futures Trading Commission or CFTC settled charges against online facility Derivabit and its founder for offering Bitcoin options contracts without complying with the commodity exchange act or CFTC regulations. In February 2018, the SEC charged bitcoin exchange BitFunder and its founder for operating an unregistered Securities Exchange and defrauding users of that exchange by misappropriating their bitcoins, in failing to disclose a cyber attack on BitFunder system that resulted in a theft of more than 6,000 Bitcoins. The Initial Coin Offering market is also ripe with fraud or more generously actors who ignore or unfamiliar with applicable laws and regulations. In January 2018, the SEC seize the assets of self-described de-centralized banking platform Arise Bank and subsequently charged the founders with fraud. Arise Bank allegedly raise $600 million in an Initial Coin Offering by claiming that it had developed an algorithmic trading application that automatically trades in various cryptocurrencies and falsely stating that it purchase an FDIC Insured bank which enabled it to offer customers the FDIC insured accounts. In December 2017, Munchee Incorporated a California based company selling digital tokens to investors for its block chain based food review service halted its ICO, after being contacted by the SEC cyber unit. They agreed to an order that found their condo constituted unregistered securities offers and sales. The company had promoted the offering as utility token, but still told investors that the tokens would rise in value due to the efforts of others and a secondary market would be created. We'll talk more about utility tokens later on in the course. Hopefully these examples emphasize the importance of getting regulation right and what can go wrong when FinTech firms get it wrong. In the most severe cases, getting it wrong spells the end of the company. FinTech companies that begin operating with a firm grasp of the laws and regulations applicable to their business cannot only avoid the pitfalls that have ensnared many a FinTech before though, but also gain a competitive advantage, and make the company more attractive investment for venture capital firms and other potential investors