Record Liquidations Trigger Spike in CEX Risk Levels After Months of Stability
Following the 10–11 October 2025 liquidation event, widely reported as the largest on record (~$19B), Agio Ratings’ proprietary model shows a short-term deterioration in CEX risk.
Prior to the event, CEX risk metrics had shown steady improvement due to record BTC prices and surges across other major coins. Levels are expected to stabilize as market sentiment returns to baseline.
The one-year probability of default (PD) for multiple exchanges and custodians is shown below and remain within a reasonable range. These figures are as of the last day of the month.
Implications for brokers and their clients:
- Ensure business interruption and cyber policies address potential downtime or transaction suspension caused by liquidation events or market volatility impacting exchange operations.
- Verify that crime policies cover asset misappropriation and internal fraud — losses that often accompany stressed market conditions.
- Sharp risk deterioration can trigger regulatory scrutiny or investor claims over risk management failures. Confirm that D&O policies explicitly cover digital asset operations and related disclosure obligations.
Calls for Urgent Reform in Australian Cannabis Sector as Overprescription Scandal Unfolds
Peak health bodies in New South Wales have called for urgent regulatory reform of the medicinal cannabis-prescribing and dispensing system in the region. Authorities highlighted a dramatic rise in patient usage, from 18,000 patients in 2019 to over 1 million by January 2024. Recent analysis by the Australian Health Practitioner Regulation Agency revealed deep concern about:
- Weak regulatory oversight.
- Aggressive marketing practices.
- The rise of cannabis-only clinics.
- Telehealth models operating at scale with minimal in-person consultation.
- Vertically integrated clinics and closed-loop prescribing/dispensing models where the prescriber sends prescriptions to a dispensary operated by the same owner.
Earlier this year, practitioners were put on notice due to concerns about overprescribing. The analysis identified eight practitioners that issued over 10,000 prescriptions within a period of six months. One of them issued over 17,000 — one every four minutes. And one pharmacist dispensed 959,000 cannabis products within a year. That’s 2600 per day.
The health bodies asked to meet the NSW Health Minister to discuss policy solutions and expressed the need to prioritize patient safety over profit and ensure GPs and community pharmacies handle prescribing and dispensing.
Implications for brokers and their clients:
- Review Directors and Officers liability cover to ensure executives are protected in the event of regulatory investigations, alleged mis-prescribing, and enforcement actions.
- Coordinate professional indemnity and product liability coverage where prescribing and dispensing occur under one entity.
- Proactively document governance, separation of duties (prescribing versus dispensing), internal audits, and risk controls to support professional indemnity cover.
Source: RACGP. (October 2, 2025). United call for action on medicinal cannabis regulation.
Crime-as-a-Service: The Growing Underground Economy Driving On-Chain Laundering
2022 was a record year for illicit activity and Chainalysis forecast that 2024 would be a close runner up. In fact, estimates of illicit activity continued to rise year-over-year, with analysts noting the professionalization of services including laundering-as-a-service.
A great deal of this growth is the result of Crime-as-a-Service marketplaces like Huione that provide on-chain infrastructure and laundering services.
However, analysts note that many criminal groups remain less sophisticated than state-backed actors that used advanced obfuscation tactics. Their reliance on basic laundering techniques and centralized exchanges presents enforcement opportunities for regulators.
Implications for brokers and their clients:
- To address diverse risks, adopt insurance solutions that combine traditional cybercrime, commercial crime, and specific crypto asset liability coverage.
- Regularly reassess policies and controls to adapt to new threats and regulatory changes.
- Seek specialized insurance that covers defense costs, penalties, fines, and settlements arising from regulatory investigations or enforcement actions related to AML/TF compliance failures.
Source: Chainalysis. (2025). Crypto Crime Report 2025.
Salesforce Hit with Lawsuit Over Copyrighted Training Data
Salesforce is facing a proposed class-action lawsuit filed by two authors who allege the company used their copyrighted books to train its xGen AI models. They state that thousands of books (written by themselves and other authors) were used without permission.
The lawsuit points out that Salesforce CEO Marc Benioff had previously criticized AI companies for this conduct, stating that it would be easy to pay content creators for their work.
The case joins a growing wave of lawsuits against AI developers over the use of copyrighted material in model training.
Implications for brokers and their clients:
- AI companies using large training datasets should ensure policies explicitly cover IP-related claims.
- Consider coverage for regulatory defense, crisis management, and reputational harm in case of accusations of using copyrighted material.
- If AI models rely on external data suppliers, review vendor agreements to ensure proof of insurance for data-licensing practices.
Source: Reuters. (October 16, 2025). Salesforce sued by authors over artificial intelligence software.
Can AI Induce Psychosis? Legal Experts Warn of Impending Class Actions Over Chatbot-Induced Harm
Legal experts warn that emerging evidence of AI-induced psychological harm to vulnerable users, including exacerbation of psychiatric symptoms, could expose developers to new forms of liability.
In an interview published in the Psychiatric Times, San Francisco attorney Dov Grunschlag states that enough people may have been harmed to justify class action lawsuits against the major AI companies involved and highlights that there’s no federal law on the matter, so cases would be governed on a state-by-state basis.
Grunschlag went on to suggest that if an AI company takes steps to make its chatbot safer after an incident (like improving moderation or adding warnings), it’s not likely that the legal risk would increase.
In other words, it may not be considered an admission of previous guilt. In fact, it could reduce future liability by demonstrating proactive risk mitigation.
Implications for brokers and their clients:
- Check whether existing product liability or professional indemnity policies cover AI applications in high-risk domains.
- Seek dedicated tech E&O coverage as the lines may be blurred between software and professional service failures in these scenarios.
- Verify that existing policies cover algorithmic decision-making errors, adverse user outcomes, and the possibility of regulatory investigation following adverse events.
Source: Psychiatric Times. (October 21, 2025). Can a Class Action Lawsuit Force Big AI to Make Chatbots Safer?
FCA Charts Course to a Digital Asset Revolution
The UK’s Financial Conduct Authority launched a consultation paper on October 14, 2025, aimed at facilitating tokenization in the UK asset management sector. The proposals target authorized funds, aiming to use distributed ledger technology (DLT) to manage unit registers, introduce a new direct-to-fund model, and establish a roadmap for future regulatory development.
The FCA’s broader ambition is to use tokenization to open up fund access, cut transaction and operating costs, and modernize investment services.
Key risks addressed include governance of DLT systems, cross-jurisdictional issues, custody and AML/financial-crime controls, and the need for fallback arrangements in case of network failures. The consultation closes in late 2025, with a policy statement expected in the first half of 2026.
Implications for brokers and their clients:
- Engage with insurers experienced in digital assets and tokenization to design comprehensive coverage addressing custody, regulatory, and financial crime risks.
- Maintain rigorous compliance frameworks aligned with FCA guidance to enhance insurability and mitigate regulatory investigation exposures.
- Monitor ongoing developments from the FCA post-consultation to update insurance coverage accordingly.
Source: Freshfields. (October 20, 2025). Tokenising the future: FCA consults on progressing fund tokenisation
