Discerning Data

Lessons from PayPal’s $2 Million Cybersecurity Settlement with the New York State Department of Financial Services

Introduction

On January 23, 2025, PayPal settled an enforcement action brought by the New York State Department of Financial Services (NY DFS) for failing to comply with cybersecurity regulations required for financial services businesses under the Department’s supervision. The settlement, which included a $2 million fine and required remedial measures, arose out of a cybersecurity incident where hackers gained access to PayPal customers’ sensitive information contained on tax forms in PayPal’s systems. As discussed further below, the incident highlights the importance of implementing an effective cybersecurity program and ensuring that employees are adequately trained to follow the policy in practice.

Summary of the PayPal Enforcement Decision

The NY DFS sets standards for cybersecurity practices among financial institutions through cybersecurity regulations established at 23 NYCRR Part 500. These regulations require all DFS-regulated entities to establish and maintain a comprehensive cybersecurity program to protect consumers’ nonpublic information (NPI) and ensure the security of information systems.

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Oh No, Canada! Takeaways from the Indictment of a Canadian National Allegedly Responsible for $65 Million DeFi Cryptocurrency Theft

On February 3, 2025, the U.S. Attorney’s Office for the Eastern District of New York (EDNY) unsealed an indictment against Andean Medjedovic, a 22-year-old Canadian national, for allegedly stealing approximately $65 million in cryptocurrency from two decentralized finance (DeFi) protocols, KyberSwap and Indexed Finance. Medjedovic is charged with wire fraud, violation of the Computer Fraud and Abuse Act (“CFAA”) for unauthorized damage to a protected computer, attempted Hobbs Act extortion, money laundering and money laundering conspiracy. This case highlights the growing risks and vulnerabilities in DeFi platforms, which remain attractive targets for sophisticated cybercriminals.

Understanding the Alleged Scheme

DeFi platforms like KyberSwap and Indexed Finance operate on blockchain networks and use “smart contracts” to manage user transactions. These smart contracts facilitate automated cryptocurrency exchanges by maintaining liquidity pools, which are funded by investors. The indictment alleges that Medjedovic, a Canadian national, manipulated these smart contracts to drain funds from these pools, defrauding investors in the process through two different exploits.

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The UK Cyber Security and Resilience Bill

Background

The UK government has recently announced that it plans to introduce a Cyber Security and Resilience Bill (Bill). The Bill seeks to update the 2018 Network and Information Security Regulations, which implemented the European Union (EU) NIS 1 Directive when the UK was a member of the EU.

A key driver behind the UK government’s plans is a desire to stay broadly aligned with evolving EU legislation, particularly with the significant expansion in scope of the new EU NIS 2 Directive. Once presented to Parliament, the Bill could become law by early 2026.

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Countries Poised to Adopt New Cybersecurity Measures After UN Adopts Major Cybercrime Convention

On August 7, 2024, after three years of negotiation, the United Nation’s Ad Hoc Committee to Elaborate a Comprehensive International Convention on Countering the Use of Information and Communications Technologies for Criminal Purposes unanimously adopted the Convention Against Cybercrime. The Convention now goes to the General Assembly, where it is expected to be adopted. If ratified by 40 member states, the Convention will enter into force.

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New UK Consumer Laws on Fake Reviews, Subscription Contracts and Drip Pricing: Impact on US Businesses

In May of this year, the UK Government passed the Digital Markets, Competition and Consumers Act (DMCC) into law. The DMCC is wide-ranging and covers three key areas: consumer law, digital markets, and merger and antitrust law.

In the first of our series of blog posts, we set out key points on the significant changes to consumer laws and regulatory enforcement powers of which US businesses selling to UK consumers need to be aware ahead of the law coming into force, which is expected to be later this year.

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EU Artificial Intelligence Act – Legislation Adopted by the European Council

The long-awaited European Union Artificial Intelligence Act (the AI Act) is nearing implementation following its adoption by the European Council yesterday (21 May 2024). This signals the completion of the final major stage of the European Union (EU) legislative process and the AI Act is expected to enter into force imminently. We considered the impact of this legislation in detail in our previous article: EU Artificial Intelligence Act — Final Form Legislation Endorsed by European Parliament.

The only remaining formalities are the signature of the President and Secretary-General of the European Parliament and Council and publication in the Official Journal, which is expected to happen in the coming days. The AI Act will enter into force 20 days after this takes place. The AI Act will become fully applicable 24 months after its entry into force (June 2026). However, some provisions will apply before that date.

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