Editor's note - This story was updated 11-12-22 to include Sam Bankman-Fried, CEO of cryptocurrency exchange, FTX, his $16 billion cryptocurrency loss recently reported this week; go to the The New Citizens Press article here which reviews in detail the recent cryptocurrency billionaire who lost everything.
Since the start of 2021 through June 2022, people have reported losing over $1.3 billion in cryptocurrency to scams. Nearly half say the scam began with an ad, post, or message on social media. The largest share of the losses, about $785 million, involved bogus investment opportunities. Cryptocurrency was the payment method used for about one in every four dollars reported lost to fraud during this period.
In this Black Headline News Live segment, host, Julia Dudley Najieb features from a September Ethnic Media Services news briefing FTC experts who explain how cryptocurrency scams work, why they are growing so fast, and what the latest “trending” scams are. They’ll also talk about groups most at risk, such as the Black and Latino communities.
Experts Rosario Méndez, Elizabeth Kwok, and Cristina Miranda also expound on how to spot and avoid cryptocurrency scams, and how to report them.
Finally, African-American cyrptocurrency scam victim, Jeffrey Vaulx, shares his personal story of how it happened to him.
Rosario Méndez is senior member of the Division of Consumer and Business Education in the Federal Trade Commission’s Bureau of Consumer Protection, where she works on the agency’s Small Business Outreach initiative. Her work supports the agency’s mission to protect all consumers, including business owners, from deceptive and unfair practices through law enforcement and education. She leads the development and marketing of the FTC’s Cybersecurity for Small Business educational campaign and the efforts to help business owners spot and avoid common frauds that target small businesses. Ms. Méndez also focuses on establishing partnerships with national and local organizations to help them alert their constituencies about consumer rights and businesses compliance responsibilities. She’s a graduate from Loyola University College of Law and John Hopkins University Carey Business School.
Elizabeth Kwok is an assistant director in the Division of Litigation Technology & Analysis for the Bureau of Consumer Protection at the Federal Trade Commission, where she oversees the eDiscovery unit, as well as supervises honors paralegals and summer law clerks. She was previously a senior investigator in the Division of Financial Practices where she investigated suspected violations of consumer protection laws, including matters relating to financial technologies, short-term lending, debt collection, and debt-relief products. Elizabeth began working at the FTC in June 2013 and has earned both a Certified Fraud Examiner (“CFE”) and Certified Anti-Money Laundering Specialist (“ACAMS”) certificate. Elizabeth has particular expertise in fraud investigations involving new and emerging technologies, having worked on the FTC’s first cryptocurrency-related and crowdfunding cases. Prior to working at the FTC, Elizabeth was an investigator with the U.S. Department of Commerce – Office of Inspector General (OIG) where she investigated contract and procurement fraud, grant fraud, serious employee misconduct, and gross mismanagement.
Elizabeth received her JD from American University the Washington College of Law, and her BA in Political Science and History from the University of California, Berkeley.
Kwok said minorities and people in undeserved communities who are unbanked or are unable to qualify for traditional banks loans are key targets. Ages 18 to 35 have been the most vulnerable victims of cryptocurrency fraud, with the hopes of earning money overnight to help them with bills.
Cristina Miranda is a Consumer Education Specialist at the Federal Trade Commission’s Division of Consumer and Business Education. She creates, implements and evaluates public marketing and communications campaigns to help consumers detect and avoid fraud and scams in the marketplace. She is also part of the FTC’s Latino outreach team emphasizing consumer education for the Spanish-speaking population in the U.S, and conducts interviews with Spanish-language media. Prior to the FTC, Cristina worked as a Director of Communications at a financial services company. She also has extensive public relations, advertising agency and publishing experience.
Cristina holds a Master of Arts from Syracuse University’s S.I. Newhouse School of Public Communications, and a Bachelor’s in Marketing from Universidad Interamericana de Puerto Rico. She is a graduate of UCLA’s Anderson School of Management Leadership Institute Executive Program.
Miranda reviewed the difference types of scams people are going to great lengths to scam people out of their digital wallets. Many of these scams are very convincing, and often assimilate governmental officials.
A key scam is job offers for struggling people who are looking for ways to make an income. She also talked about the blackmail emails with the crytocurrency type scams, where scammers convincee victims thta.
Jeffrey Vaulx is a special education teacher in the Memphis City School District, in Memphis, Tennessee who has been teaching for nine years.
Prior to teaching, he was a probation/parole officer for the state of Tennessee.
Vaulx discussed how the scam started through Facebook; the social media platform took advantage of his friendship connections to help him feel comfortable in investing in the cryptocurrency scam. Although he felt the gut in his stomach telling him things didn't feel right, especially after the first $500.00 he gave, he wanted things to work for him anyway, a seemingly much needed investment to make big returns--hopefully.
FTC news you may have missed in August:
Agency Alleges that Meta and CEO Mark Zuckerberg are Attempting Illegal Acquisition to Expand Virtual Reality Empire
The Federal Trade Commission is seeking to block virtual reality giant Meta and its controlling shareholder and CEO Mark Zuckerberg from acquiring Within Unlimited and its popular virtual reality dedicated fitness app, Supernatural. Meta, formerly known as Facebook, is already a key player at each level of the virtual reality sector. The company’s virtual reality empire includes the top-selling device, a leading app store, seven of the most successful developers, and one of the best-selling apps of all time. The agency alleges that Meta and Zuckerberg are planning to expand Meta’s virtual reality empire with this attempt to illegally acquire a dedicated fitness app that proves the value of virtual reality to users.
“Instead of competing on the merits, Meta is trying to buy its way to the top,” said FTC Bureau of Competition Deputy Director John Newman. “Meta already owns a best-selling virtual reality fitness app, and it had the capabilities to compete even more closely with Within’s popular Supernatural app. But Meta chose to buy market position instead of earning it on the merits. This is an illegal acquisition, and we will pursue all appropriate relief.”
The virtual reality industry offers a uniquely immersive digital experience and is characterized by a high degree of growth and innovation. Unlike content on a tablet, phone, or monitor, virtual reality gives users the perception of being completely surrounded as they move. Users typically engage with the virtual reality experience through a headset with displays in front of each eye to place them in a fully rendered, three-dimensional environment. Software and studio companies develop virtual reality apps that run on headsets and are distributed in online app stores. These apps run the gamut of genres from rhythm games to e-sports to creation and exploration and more.
Meta, the global technology behemoth that owns Facebook, Instagram, Messenger, and WhatsApp, is the largest provider of virtual reality devices, and also a leading provider of apps in the U.S. The complaint alleges that under the leadership of Zuckerberg, the company began its campaign to conquer virtual reality with the acquisition of headset manufacturer Oculus VR, Inc. Fueled by the popularity of its top-selling Quest headsets, Meta’s Quest Store has become a leading U.S. app platform with more than 400 apps available for download.
In a publicly reported email to executives, Zuckerberg said that it was critical for the company to also be “completely ubiquitous in killer apps,” which are apps that prove the value of the underlying technology. As part of its app expansion, Meta purchased seven of the most successful virtual reality development studios, and now has one of the largest first-party virtual reality content catalogues in the world. The acquisition of the Beat Games studio gave Meta control of the wildly popular app Beat Saber.
Within Unlimited is an independent virtual reality development studio that designed and built Supernatural, a popular app in the dedicated fitness virtual reality app market. Supernatural offers a variety of high-quality workouts set to music, including tracks from A-list artists like Katy Perry, Imagine Dragons, Lady Gaga, and Coldplay, and virtually located in striking, photorealistic locales, like the Galapagos Islands. The agency’s complaint notes that according to Within’s co-founder and CEO, “Fitness is the killer use case for VR.”
The complaint alleges that Meta is a potential entrant in the virtual reality dedicated fitness app market with the required resources and a reasonable probability of building its own virtual reality app to compete in the space. But instead of entering, it chose to try buying Supernatural. Meta’s independent entry would increase consumer choice, increase innovation, spur additional competition to attract the best employees, and yield other competitive benefits. Meta’s acquisition of Within, on the other hand, would eliminate the prospect of such entry, dampening future innovation and competitive rivalry.
The complaint further alleges that the mere possibility of Meta’s entry has likely influenced competition in the virtual reality dedicated fitness app market. If Meta is allowed to buy Within, that competitive pressure will slacken. That lessening of competition violates the antitrust laws, according to the complaint.
The complaint also alleges that when viewed against the broader backdrop of the market for all virtual reality fitness apps, Meta’s proposed acquisition of Within is also illegal. Meta already participates in this broader market with its Beat Saber app, as does Within with its premium rival app Supernatural. The two companies currently spur each other to keep adding new features and attract more users, competitive rivalry that would be lost if this acquisition were allowed to proceed.
The Commission vote to authorize staff to seek a temporary restraining order and preliminary injunction was 3-2. Commissioners Noah Joshua Phillips and Christine S. Wilson voted no. A federal court complaint and request for preliminary relief has been filed in the U.S. District Court for the Northern District of California to halt the transaction.