▶ 0:20:15>> the hearing will now come to order. First, let me welcome our colleagues from the U.S. house of the committee on the chinese communist already. I want to thank chairman moolenaar and ranking member krishnamoorthi for joining myself and ranking member gillibrand for this incredibly important hearing. The U.S. senate special committee on aging is charged with examining any and all matters pertaining to the problems and opportunities of older people. Our jurisdiction is purposely broad.
▶ 0:20:47What most impacts aging americans today could radically different from what impacts the seniors of future generations. In fact, if we do our jobs here, the problems we worry about today look the long solved before -- it is in the spirit we come together with our colleagues from the U.S. house committee to focus on threats americans face when there retirement savings are invested in communist china.
▶ 0:21:13The government of communist china has chosen to be america's enemy. I wish it was not true. Unfortunately, it is. Unfortunately, that is not only a problem our military and intelligence community has to worry about.
▶ 0:21:30The government of communist china has shown again and again it will do anything to hurt america, going after our citizens, targeting the retirement of hard earned -- targeting the retirement hard earned by seniors. You are at risk of losing every dollar, and this could happen overnight. I know this may sound extreme to some, but here is what we know.
▶ 0:22:00There is a clear risk to american investments in china because the chinese communist party which does nothing but lie, cheat come and steel, controls every business in its country. There is no industry income is china. The ccp controls every thing. Choosing to invest in common is china jeopardizes the retirement savings of every american. We will talk about the threats posed to individual retirements of american seniors.
▶ 0:22:28These scams by the ccp and the national security risks of investing in china, but as the senate of the committee, my focus is on ever seniors and using today's hearing and our partnership with our colleagues in the senate and house to protect seniors from known bad actors like the chinese communist already to make sure they know where their dollars are being invested and why they need get the heck out of china's investments today.
▶ 0:22:53I bet many in this room have retirement investments they may not even know what companies these investments are invested in. This is a problem. Because of intentional or incompetent failure to enforce existing laws. This is true in every form of government and dangerously to when it comes to holding countries and governments accountable.
▶ 0:23:21In 2020, the holding foreign companies accountable act was signed into law by president trump, which mandated that if companies in communist china did not comply with U.S. examiners for three straight years, they must, not maybe, they must be delisted and banned from trading in america, reducing the years from three years to two years.
▶ 0:23:51The sec failed to enforce this law in the last administration. Today, many chinese companies are still listed on american exchanges in clear violation of U.S. law this is a perfect example of why your money is not safe when investing in companies tied to communist china.
▶ 0:24:12I hope to hold the sec a couple to enforce the law and working with chair moolenaar, ranking member krishnamoorthi to protect americans from threats posed by communist china are fully posed we are also finding gaps in current law with multiple pieces of legislation that will hold communist china accountable.
▶ 0:24:33These bills will take the necessary steps to secure markets, protect consumers, demand transparency and accountability, and ensure investors especially seniors, who are the most vulnerable, are protected. We need to stop putting americans's retirement at risks with investment in communist china. I believe the new chairman of the sec is committed to enforce this act. Stop putting americans's retirement at risk due to the ccp.
▶ 0:25:05Americans work way too hard to have their financial security destroyed by communist china. Today we will learn more about this problem and come up with a policy plan to stop it before it is too late and americans's retirement is wiped out by communist china. I would now like to recognize chai moolenaar for his opening statement -- chair moolenaar for his opening statement.
▶ 0:25:27Chair Moolenaar: Thank you for hosting us today. Appreciate the colleagues from the house and senate being part of this. This is unique because it reflects growing momentum in congress to confront the growing risk to american investors and our national security. Let me start with a simple poem good the future of american capital markets and our security are deeply connected. They are inseparable.
▶ 0:25:54Chair Moolenaar: For decades, the united states has led the world in innovation and investment, but today that leadership is being challenged not just by market forces but by a foreign adversary, the chinese communist party. The ccp is actively using its financial system and state-controlled companies to infiltrate american capital markets. And while some might see that as just another investment fix, it is more than that. We have already seen the damage.
▶ 0:26:22Chair Moolenaar: In 2021, the ccp abruptly imposed sweeping regulations on china's private education sector, banning profit-making, foreign capital, and public listings. That decision wiped out billions of dollars in U.S. investment almost overnight, devastating major companies.
▶ 0:26:43Chair Moolenaar: It was a wake-up call, not just for what can happen in a single sector, but for the broader reality that when the ccp maintains ultimate control, no company is truly independent. And I look forward to the hearing today from the witnesses on how the ccp control creates systemic risk for U.S. investors regardless of industry. Mr.
▶ 0:27:06Chair Moolenaar: O'leary has pointed out something in his written testimony equally concerning, this year the ccp holds in many chinese company's picket on paper, these firms may look like private enterprises, but the reality is that party in performance runs deep. One political control overrides fiduciary responsibility, even the smartest investor can be left in a losing position. That issue has also shaped policy decisions here in washington.
▶ 0:27:36Chair Moolenaar: The tiktok bill for example was crafted to require full divestiture of ccp control. Because anything less would leave the door open to the same risks. We have seen this at play time and time again.
▶ 0:27:53Chair Moolenaar: Congress has acted before to safeguard american investors through the public company accounting oversight board and the holding foreign companies accountability act, but the reality is this, the ccp's opaque regulatory regime, its disregard for the rule of law, and his willingness to use financial to for political gain present ongoing and significant dangers to american savings.
▶ 0:28:21Chair Moolenaar: So the question becomes this, what more can congress do to protect U.S. investors from companies effectively controlled by a hostile regime? That is what today is about. You will hear from experts who understand how the ccp uses its influence to mask risk, suppress transparency, and undermine shareholder rights, and we will look at what happens when american money flows into companies tied to surveillance, censorship, military buildup,
▶ 0:28:51Chair Moolenaar: Even human trafficking. Americans deserve to go whether there capital is being used to fuel the very threats we are trying to guard against, and they trust us to take action to keep their investments safe. This hearing is not just the end of the conversation. It is just the beginning. Thank you, Mr. chairman, and I'll forward to today's discussion.
▶ 0:29:13Chair Scott: Thank you, chairman moolenaar. Now I would like to recognize ranking member gillibrand for opening statement.
▶ 0:29:18Sen. Gillibrand: Thank you, chairman. It is a delight to be here. Think into our witnesses. This is a very hot topic in new york. I want to thank my republican and democratic house members to do -- for doing this. This is fun. We should do this more often. I am sure all of us have been hearing from our seniors quite a bit. This has been a tough time for seniors.
▶ 0:29:42Sen. Gillibrand: The stock market's ups and downs looming over $1 trillion of oath over the last few weeks, it is very anxiety provoking for so many seniors. The social security administration, they can't make a phone call to them, the phone calls are not returned, they are on hold for five hours, multiple stories, problems with getting online access. Just the list of worries goes on.
▶ 0:30:08Sen. Gillibrand: But the one issue that has provoked and upset and concerned my seniors the most over the many, many years I have been on this committee is these online scams. The scams that are coming out of criminal networks worldwide are unbelievable, heartbreaking, horrific, highly complex, international criminal networks are going after our seniors because they know they are soft targets.
▶ 0:30:38Sen. Gillibrand: They know they are worth trillions of dollars and if they can get underneath their skin, if they can get them to click on the right button, if they can get them to open a certain piece of mail, if they can get them on the phone and pretend they are their grandchild, they will be able to steal thousands and thousands of dollars. The p.r.c., there are criminal networks in china that are so sophisticated that no this is where they can make millions and millions of dollars.
▶ 0:31:07Sen. Gillibrand: And so I think this hearing is essential. I am so grateful we have bipartisan, bicameral support for figuring out how to help law enforcement crackdown more effectively on these international criminal networks that are targeting our seniors. The fbi indicates that seniors are disproportionately affected by frauds and scams with over $3.4 billion in scam related losses for individuals 60 and over in 2023 alone.
▶ 0:31:39Sen. Gillibrand: So we must understand the scope of this problem. And what I have talked to my local law enforcement and ask them what can you do, they basically have a tough time crossing borders and crossing countries to be able to actually get to the bottom of these scams and these criminal networks. So they need resources. They need support. They need far more help. We know that these p.r.c. Organized crime networks are operating in southeast asia.
▶ 0:32:10Sen. Gillibrand: They are operating in countries around the globe. And they are able to create massive scams. One of the ones Mr. krishnamoorthi and I were talking about is I never heard this term, the pig butchering scam. So they are looking at our seniors like animals that they are fattening for slaughter.
▶ 0:32:32Sen. Gillibrand: They will scoop them into a scam, get them to trust them, get them to give more and more access to their accounts to the point where they feel like they can get all of the money, and then they steal it. That is a disgrace. That is disgusting. That is something we have to do something about. The gao just issued a report.
▶ 0:32:51Sen. Gillibrand: We asked for this report, requested, and it outlines the actions of the federal government and what they can do to improve complaint reporting, consumer education, and federal coordination to counter scams. That is just the beginning of what we should be doing, but I just want to thank you, Mr. chairman, for caring, to have this hearing.
▶ 0:33:14Sen. Gillibrand: I want to thank republicans and democrats from the house and senate for being here and shining a light on this outrage happening in our country that we have done insufficient amounts about. We need more tools. We need more resources. We need a laserlike focus on how we can make our seniors whole.
▶ 0:33:29Chair Scott: Thank you, raking member gillibrand. Now we would like to hear from ranking member krishnamoorthi.
▶ 0:33:37Rep. Krishnamoorthi: Thank you, chair scott. Thank you, chair moolenaar. Thank you ranking member gillibrand for convening yesterday. I would like to address three things. First, a skimming practice called pig butchering, but senator gillibrand just referenced. Second, the impact of china backed organized crime syndicates's scams on older americans. And third, china's culpability in scams.
▶ 0:34:03Rep. Krishnamoorthi: First, pig butchering is a scam named for the way it lures victims into my patens them up, gains their trust, and then drains their finances. In many cases, a scammer poses as a family number or friend urgently in need of money. And others come a scammer uses fake identities to get romantically involved with unsuspecting victims such as older adults.
▶ 0:34:28Rep. Krishnamoorthi: Once the victim's trust is earned, the scammer asks for money or suggest investing through a fake cap that drains the victim's finances. Take a look at this story from this video just outside my district from a woman who lost almost $1 million to a scammer using pig butchering. >> her husband passed away decades ago and recently met a man online. >> he said he loved me. The second time, I sent $5,000.
▶ 0:35:00Rep. Krishnamoorthi: >> over time, that money reached nearly $1 million. The scammer told her she would get double of money back in his investments. Instead, she now owes money back to her bank, cash that she took from her home equity loan.
▶ 0:35:13Rep. Krishnamoorthi: Now, my second point. This is not just a financial issue but a human issue at a national security concern. Cyber skimming in southeast asia , mainly burma and cambodia, is driven by chinese gangs and generates almost $44 billion annually. Weak law enforcement and corruption in this region have also allowed gangs to traffic from 70 countries, including americans, into this illegal skimming industry.
▶ 0:35:43Rep. Krishnamoorthi: As usi has pointed outp, the skimming is so vast and so lucrative it now parallels fentanyl as one of the top threats posed by chinese criminal networks to the united states. My staff actually received a scam text this week. I am not joking. Which we can see here. And it starts with a simple hello. Many of us just delete or not respond when we get texts like this one.
▶ 0:36:14Rep. Krishnamoorthi: In this case, we decided to respond to better understand how these scams work. Within minutes, we received a whatsapp link and pictures of a woman who said her name is daisy. He or she is. And she says, these are all my travel photos from different countries. Every time I travel, I can meet all kinds of people and things. Daisy then goes on to complement us saying, you are welcome.
▶ 0:36:45Rep. Krishnamoorthi: You give me the impression of a kind, friendly, polite, and well mannered man. I can feel the warmth when chatting with you. Over the quest of just seven hours, our dear friend daisy asked for an investment, advice that are asked how much she needs. She responded, approximate investment of $10 million to $30 million. Monday that daisy would happily walk away with.
▶ 0:37:11Rep. Krishnamoorthi: It is dangerous scams like these that are praying on older americans. Third and my final point. There is more to this story than just chinese gangs operating in the shadows. These groups, these gangs are directly tied to the chinese communist party. This is broken tooth, a chinese businessman or more accurately a mafia boss who is behind a scam compound tied to the ccp.
▶ 0:37:40Rep. Krishnamoorthi: Broken tooth's public motto is "I used to fight for the triads, and now I fight for the communist party." another gentleman behind another scam city seen here with a burmese warlord. He is wanted in china for financial crimes, but his ties to the ccp allowed him to operate freely for years before being detained by thai authorities.
▶ 0:38:10Rep. Krishnamoorthi: China now seems to be taking some steps to record with this issue, but it is too little too late. Like the fentanyl issue, the ccp turned a blind eye and has allowed this to happen. The ccp must recognize its role in allowing gang boxes and scam centers to absolutely run rampant. The financial and human cost of these scams as an artist, and we must act now to protect older americans. Thank you, and I yield back.
▶ 0:38:36Chair Scott: Thank you, ranking member. I would like to welcome our witnesses here today. Before I introduce our first witness, I would like to ask each of you to be mindful of our limited time today. Keep opening statements to five minutes. First I would like to welcome kevin o'leary also known as Mr. wonderful. He is a business leader, investor known to begins of americans for his role in the hit tv show "shark tank." Mr.
▶ 0:39:03Chair Scott: O'leary understands the risks and threats posed by common is china and why investing in your attire and there is a bad -- investing your retirement there is a bad idea. Thank you for being here today. You may begin your testimony.
▶ 0:39:18Mr. O'Leary: Thank you, chairman scott, chairman moolenaar, ranking member krishnamoorthi. I want to shine a light on an issue that impacts millions of american investors, many of whom have invested their retirement funds and equity markets.
▶ 0:39:44Mr. O'Leary: The threats posed by the chinese communist party impact anyone and everyone like me who has tried to do business in china. Everyone that invests in the stock market, anyone that invests in passive investment vehicles like international index funds or mutual funds, any retail investor that invests in china's companies, anyone that invests internationally in emerging markets like china, and everyone with a 401(k) plan or pension invested in international index funds. I have nothing against the chinese people.
▶ 0:40:14Mr. O'Leary: Their contributions to science and art over the millennia are well-documented. It is their government I take issue with. In my opinion, since joining the wto in 2000, the chinese government has never played by its rules. This has led to the ccp passing various laws in the realm of cybersecurity, espionage, intelligence, and beyond, and other mechanisms to control its corporations, industries, and business partnerships. All to the detriment of U.S. investors.
▶ 0:40:44Mr. O'Leary: This is not a new phenomenon. It has been part of the long game china has been playing for decades. Let me just elaborate briefly on a few reasons why the time for us to address this matter is today. It's desire to reduce state run companies and its holdings in them, the chinese cup and he divested itself from them. However, in return for taking a 1% share in the company, the government is granted a seat on the board, voting power, and influence over all business decisions.
▶ 0:41:14Mr. O'Leary: It is effectively a super voting right. This is the so-called golden share. That xi is using to control the sale of tiktok. If that was not bad enough for investors, china protects investors, china pro cleverly exploits variable interest entities to approximate the ownership of corporate shares.
▶ 0:41:40Mr. O'Leary: If you own stock in a company like tencent, alibaba, or icbc, you don't actually own stock in a company. You own a share of a contract of something in the cayman islands trying to approximate stock ownership. The U.S. has given china preferential treatment for over a decade through its own special memorandum of understanding that governs oversight.
▶ 0:42:09Mr. O'Leary: Pcaob has continued to allow china to game the system with special treatment not afforded to other countries. Even our allies. This is a completely unbalanced situation. And why do we allow this? How can this be viewed in any way as fair to american investors? There should be complete parity between the U.S. and china.
▶ 0:42:33Mr. O'Leary: I believe congress should act to delist ccp companies on until there is a parody of treatment. That should not be allowed to own stocks in the U.S.. This business is in china can operate with the same freedom that chinese businesses can operate here. We should exit china's market place until the ccp makes significant reforms. We should demand all chinese companies engage in U.S. markets, comply with U.S. accounting standards.
▶ 0:43:04Mr. O'Leary: For decades across multiple administrations, we have discussed leveling the playing field with china. Instead, the situation has only gotten worse. Make no mistake, I want to do business in china. So do millions of other investors and companies but we want a reciprocal ecosystem in place that is transparent where all parties play by the rules we truly agreed upon.
▶ 0:43:35Mr. O'Leary: The chinese enjoy these rights in the U.S. why do we not have them in china? Lately there has been a lot of rhetoric bring negotiations globally on who holds the cards. The U.S. is still the world's largest market supported by the world's largest economy and the rule of democratic law. That is why so much of the world's cap is invested here. That is a lot of leverage. Let's fix this chinese problem while we still hold the cards. I look forward to a robust conversation today and answering any questions you may have.
▶ 0:44:05Mr. O'Leary: Thank you.
▶ 0:44:05Chair Scott: Thank you, Mr. o'leary. I would like to welcome christopher iacovella. He is the president and ceo of the american securities association and serves as the leading voice for financial services policy. He worked at the U.S. commodity futures trading commission. Thank you for being here, and I look forward to hearing your testimony.
▶ 0:44:28Mr. Iacovella: Thank you. I am good for the chairs, ranking member's, and members of each community for the opportunity to testify today. Today, I will discuss the risks the ccp poses to american investors and to our national security. It was widely believed the free flow of capital china would liberalize its systems but that about happen. The opposite occurred.
▶ 0:44:57Mr. Iacovella: Beijing used the openness of the international economic system to exert geopolitical leverage over the U.S. and our allies. Rather than liberalize, the ccp has been engaged in a multi-decade, multifaceted political, economic, and military. The goal is to create a new world order through manipulation while avoiding a hot war. This has left the world less open and more authoritarian.
▶ 0:45:26Mr. Iacovella: To implement the strategy, the ccp needed capital, and that is where wall street comes in. For over two decades, beijing has used wall street. In exchange, wall street seemed huge fees and access to the chinese market. It is this quid pro quo that directly threatens america's economic and national security. The partnership works like this. First wall street spends a narrative about emerging market returns and the china opportunity, then it sells chinese company's to american investors on our exchanges.
▶ 0:45:57Mr. Iacovella: After the ipo, the money goes to china and wall street content is propping up these companies by putting them in stock index funds, touting them on financial media, and lobbying washington to maintain the status well. To raise money on exchanges, companies used a novel scheme. This scheme allows a cayman islands shell company that contracts the mainland chinese complete to list shares on our exchanges.
▶ 0:46:23Mr. Iacovella: American investors have no equity or voting rights in the shares of the chinese company, and very little legal protection. We join the select committee in adding congress to delist every vie from the exchanges. After the vie scheme was scrutinized, the ccp needed ways for americans to buy mainland chinese companies listed on mainland chinese stock exchanges , so wall street used what I call a passive index loophole which allows these companies to be included in international
▶ 0:46:54Mr. Iacovella: Emerging market and china specific index funds. This loophole has funneled billions of dollars in american savings to chinese companies while allowing them to avoid all of the disclosure, financial reporting, and audit requirements american company's must comply with to sell stock to american investors. This loophole also exposes american investors to enron like frauds, chinese military companies, and companies that support egregious human rights abuses. It must be closed.
▶ 0:47:24Mr. Iacovella: The select committee also found that numerous chinese companies on our exchanges and index funds are on government prohibition lists. The company goes on one of these lists if it is a threat to our national security, foreign policy, or economic interest. There is no policy basis for any company on these lists to access our markets and we recommend an entity placed on one government list should be placed on all lists and automatically allow the treasury secretary to delist or d index these companies from our capital markets.
▶ 0:47:52Mr. Iacovella: Because china operates as a party state, this raises another important policy question. How does the ccp use american money? Fortunately, american investor money is used to fund the emission of more greenhouse gases that every developed country combined. Pla weapons systems, a cyber army that relentlessly attacks as, subsidies for chinese companies who dump their goods into our market, and sickening rights abuses.
▶ 0:48:20Mr. Iacovella: The people of america want this to stop but unless congress makes the funding of the ccp illegal, it won't. Final issue I want to talk about today is fraud, which has gone from an individual criminal act to a lucrative business activity funded by state-sponsored actors. Americans lost $158 billion in 2023 and are expected to lose billions more as generative ai fraud evolves. Every day, members face scams that target their employees, firms, and customers.
▶ 0:48:50Mr. Iacovella: While billions are spent tried to stop this, americans who have been scammed know that if they cannot get their money back before it goes to china, it is god the government and the private sector have an obligation to work together to stop this avalanche of fraud from continuing to harm americans. To conclude, communist china does not play by the rules and it is time for us to revoke the privilege we give them to play in our game. This is not a left or right issue or a red state or blue state issue. It is an american issue.
▶ 0:49:19Mr. Iacovella: Now we need congress to take action to protect our people from the ccp. Thank you, and I am happy to take your questions.
▶ 0:49:25Chair Scott: Thank you. Now I would like to introduce our next witness, brady finta, a retired fbi agent that founded the national elder fraud justice coordination center. Through his work as fbi agent, he oversaw cases targeting older -- he oversaw cases of scam rings targeting older americans.
▶ 0:49:49Mr. Finta: Good afternoon. I am honored to be here. I believe the scam or fraud against older americans has grown to epic proportions and it is time as a country we treated as such with a proportionate response.
▶ 0:50:05Mr. Finta: I spent 23 years as fbi agent supervising transnational organized crime cases and when my assignment exposed me to elder fraud, transactional national crime under a different name, what I was prepared for was the volume just in my limited territory, I was inundated with elder fraud claims without adequate resources to fight the threat. No one has those level of resources.
▶ 0:50:33Mr. Finta: Even after standing up the task force alongside the U.S. attorney's office in the san diego district attorney's office and bringing forward our very first successful rico prosecution, our ability to make a dent in the crime problem was minimal, particularly as we were able to only address less than 1% of leads. Based on my experience, I believe 10% to 15% of the elder fraud victims ever report the crimes against them. Even with this low percentage, the volume of complaints is still too large to investigate.
▶ 0:51:06Mr. Finta: Elder fun scam cases are not easy. They are incredibly time-consuming. They literally spanned the globe, combining organized crime groups in foreign countries with regional organizers, co-conspirators and mules in the united states. Laundering runs the gamut from cash to give cards to wire transfers to digital currencies.
▶ 0:51:27Mr. Finta: For the most part, the complicity of these cases combined with jurisdictional challenges and resource requirements limit their investigation and prosecution to further entities, for the restraining resources -- further restraining resources. I saw scammers in india working with those in the bahamas and the dominican and united states and criminals laundering the proceeds.
▶ 0:51:52Mr. Finta: The international nature of these scams make them extremely difficult for law enforcement to prosecute and hold the terminals accountable. It gets more difficult where the country where the crime is based is uncooperative. This hearing is intended to mean the focus on china but I would like to emphasize this is a larger global issue and we do not currently have the resources to properly address it. This threat touches all of us.
▶ 0:52:17Mr. Finta: I would venture to say everyone in this chamber has a story, acquaintance, coworker, or family member who has been victimized. Both of my parents were victims. My mother did not want to tell me based on embarrassment and believing there was nothing anybody could do. There is always something we can do.
▶ 0:52:36Mr. Finta: The ftc estimates the losses are approximately $61 billion and the fbi statistics that showed a huge these complaints over the last few years further underscoring the time is now for a more dramatic response. A whole of society response. As a country, we have created national taskforces of state, local, and federal agencies to combat illegal narcotics, gangs, child exploitation, and terrorism. Our parents and grandparents deserve nothing less.
▶ 0:53:06Mr. Finta: In addition, we could make these taskforces more effective by supporting them with the power, speed, and agility of the private sector. Beyond continuing education programs, information sharing, and new preventive efforts, a true public-private partnership which combines law enforcement and the many robust anti-fraud efforts already in place in so many countries across the united states could create real impact.
▶ 0:53:30Mr. Finta: This is the mission of the center, to bring these efforts together, amplifying these investigations with cross sector data to elevate the most impactful cases and speed up the process to allow for more of them.
▶ 0:53:46Mr. Finta: Our founding members at aarp and amazon and google and walmart are dedicated to the idea of pulling resources together for this cause, and our partnership with the national forensics training has the opportunity for hundreds of other company's to do their same. I look forward to answering your questions.
▶ 0:54:06Chair Scott: Thank you to the witnesses for being here. Now we will go through and start asking some questions. Let me start with Mr. o'leary. Can you explain this idea? Chinese companies can buy investment in a chinese company and we have no idea whether their financial statements are accurate because they don't have an obligation like american companies do.
▶ 0:54:34Chair Scott: And our sec has not enforced rules which would require any american company to comply but for whatever reason chinese companies don't have to. What is the risk to the investor?
▶ 0:54:46Mr. O'Leary: No transparency. Regulations in the U.S. and the regulatory environment and the bodies that enforced it have created the most successful capital markets on earth. More than half or almost 60% of the world's capital is invested because of the rules put in place for transparency, and everything that makes these capital markets work in the united states.
▶ 0:55:10Mr. O'Leary: And yet somehow, and I am calling follow as an issuer of securities forced by these big additions I abide by for obvious reasons and want to come I want to be compliant, but I also have to bear that skillet and costs each year, which are millions of dollars, to be compliant. And yet I look beside me and I see a chinese company that is completely wearing these regulations and suffers no outcome at all.
▶ 0:55:38Mr. O'Leary: I mean, there is no consequences. I understood the law gave them 36 months for compliance and then it was adjusted down to 24 months, and still they are listed, and still I have to compete with them to raise capital. And they don't even have to pay the compliance costs. I mean, what is wrong with this picture? How can this possibly be going on? I am above -- I am so excited that finally this is getting national focus.
▶ 0:56:08Mr. O'Leary: This is absolutely outrageous and unfair. And we are letting them take this capital they raise in these markets that we cannot get the same thing there. We cannot litigate their or protect -- there or protect the ip there. They use the core system to litigate my companies after they steal the ip and not the product off and I cannot do anything about it except come here and say wake-up. Like this has got to stop. It has got to stop. They have to pay the consequences.
▶ 0:56:40Mr. O'Leary: There have to be consequences. I would be in a federal jail doing what they do in terms of not being transparent. There is no way this can go on.
▶ 0:56:52Chair Scott: So the security and exchange commission requires a company that wants to be a stock to the public to provide disclosure of anything that is -- and on top of that they require to give financial statements. That is what you have to do.
▶ 0:57:09Mr. O'Leary: I also have to disclose if I have a super preference share. It has to be disclosed. One individual controls the entire outcome of the board and company. Who would want to invest in a company like that? You think I can raise anybody like that? I have a golden share that only I can decide on outcomes on any single issue? The board is irrelevant. That is basically what the share is. Can I compete?
▶ 0:57:34Mr. O'Leary: I bet you there are hundreds of companies that have not disclosed that listed in america today on the nasdaq and nyse. Why are they trading? I can't do that. How come they can? They got to be -- listen. If you think that is ok and you want to invest in a company where one individual has a super golden share, go ahead. The chances you go to zero are very high because that person may not have any governance or momentum or consideration of the rest of the shareholders.
▶ 0:58:04Mr. O'Leary: That is why we don't allow this here. That is why we are the most successful capital market on earth, because investors feel confident there are no golden shares on the balance sheet. Because the board would enjoy time in a federal prison if they tried that. And we don't do that to the chinese. It has just got to stop.
▶ 0:58:22Chair Scott: So number one, they are not complying with sec rules. Number two, they are not complying with the exchange rules. And number three, anybody that has taken the public, they can't comply because they can't disclose anything material because there is not enough information, right?
▶ 0:58:40Mr. O'Leary: Why wouldn't you put consequences on those that facilitate this? I would love to pour boiling oil over my competitors that are not being compliant that is why we have competitive markets. I know what the rules are. If I want to do a listing, raise capital, whatever it is, I know what the rules are, and I cannot be noncompliant. Yet I am competing with companies that go after that same dollar from the investor that are totally opaque.
▶ 0:59:10Mr. O'Leary: That is just wrong. I am happy to come here and scream about it. Happy to do that. I am happy we are having this now.
▶ 0:59:19Chair Scott: Thank you, Mr. o'leary. I will turn it over to chairman moolenaar.
▶ 0:59:25Chair Moolenaar: Thank you, Mr. chairman. Mr. o'leary, if I can follow up with you, we are here to explore today that risky business of investing in chinese companies. It is an area where you have some experience as a potential purchaser of tiktok. Tiktok as you know is one of the most prominent chinese companies on the planet.
▶ 0:59:48Chair Moolenaar: And when you were putting together your tiktok bid, what sort of national security and legal risks were you most concerned about, and how did those risks affect the bid that you constructed?
▶ 1:00:01Mr. O'Leary: The truth about tiktok is, and I am aware of this, and many others in the social media industry and software and ai industry know this, tiktok is weapons grade spyware. Period. It is one of the best propaganda machines I have ever seen.
▶ 1:00:21Mr. O'Leary: If you want evidence of it, go on the last 24 hours and look at the videos generated there through ai of overweight americans on sewing machines even the president himself, or even iphones screwing in screws with the message, let's make america great again. I have never seen such blatant propaganda. That is right in this situation, this law is real and very specific.
▶ 1:00:49Mr. O'Leary: There is a zero ruling about redefining what the laws said regarding the algorithm. What it says is we cannot in any interested syndicate that wants to buy this cannot use the algorithm. That is the plain language. And then further defined with higher resolution on the top paragraphs of page five of the nine page ruling from the supreme court, 9-0, very definitive, no algorithm.
▶ 1:01:15Mr. O'Leary: Now, many syndicates have been formed with the idea of releasing the code, releasing the other with them, buying the algorithm, fixing it, putting it on un-american server. What everybody was looking for in the capital markets is the definition of whether this was even possible. Would you write an indemnification? Would you put that indemnification in the reconciliation act in an attempt to get 51 votes?
▶ 1:01:39Mr. O'Leary: Would you go back to congress to change the law and get 60 votes to allow an indemnification for a buyer to survive into the next administration? Because the penalty is $5,000 per 24 hours per account. That is $80 billion plus. Nobody is going to do that unless they are indemnified. And I understood today from a senator that that is off the table. Now we have clarity. Whoever is going to buy tiktok is not going to buy the algorithm. Period.
▶ 1:02:09Mr. O'Leary: That is clear. I think it is great that we have done that because it mixed the competition much more focused. Do I want to talk to survive? Yes. I am an advocate as you know for small business in america. Companies around 500 employees. Over 7 million families make their living on tiktok. It is a very competitive product when used properly. I would love to be part of the syndicate that buys it. There is no question about it.
▶ 1:02:39Mr. O'Leary: These small businesses create 62% of jobs in america. They are the american economy. I would like to see this product survive. Happy to play by the rules. 100%.
▶ 1:02:50Chair Moolenaar: Can I just follow up with you? You talked about the golden share, and I would like to hear you talk more about that. Relative to tiktok, does xi jinping have a golden share in bytedance?
▶ 1:03:06Mr. O'Leary: Ask yourself when talking about buying talk, we are not talking about the shareholders of the company that owns it, bytedance. There is only one narrative that matters. Every buyer knows this. What is president trump going to do with xi on tiktok? 100%, he has a golden share. There is no other way this deal is getting done.
▶ 1:03:33Mr. O'Leary: And I think that is the case for hundreds of companies that raise capital in the american markets. He will personally decide he may not like that. I certainly don't, but I respect it to be a fact. I know I can't do this deal or anybody can without his decision on what the structure will be. The laws currently here allow for the chinese to own up to 19.9%. This is a media company. These laws are already in place.
▶ 1:04:03Mr. O'Leary: I am happy to work with this deal as every syndicate would be as long as it is compliant. Does xi have a golden share? 100%. He alone will decide.
▶ 1:04:16Chair Moolenaar: Thank you very much. With that, I would like to call on senator gillibrand.
▶ 1:04:22Sen. Gillibrand: Thank you very much, Mr. chairman. Appreciate you very much. For Mr. finta, during your career as an fbi agent, you worked on a case that uncovered a monthly national -- a multinational fraud ring that targeted elderly american individuals.
▶ 1:04:46Sen. Gillibrand: It is extremely difficult for law enforcement and prosecutors to hold these transnational actors accountable due to the lack of coordination and resources. What do you think should be and could be done to combat and investigate these frauds and scams that target our older americans that are perpetrated by these international criminal networks?
▶ 1:05:06Mr. Finta: I appreciate the question, senator. What I said before, there is something we can do. I genuinely, truly believe that. We have an opportunity in the united states not just in law enforcement at our government in our private sector, and truly even during those cases, and pretty much every single one of them involved criminal enterprises overseas with co-conspirators in the united states, our private sector holds
▶ 1:05:36Mr. Finta: The data that we need for that evidence, for the investigation, for the fo. It is available by subpoena through hard work that sometimes takes years to work through these cases, which essentially defeats us from getting a lot of progress against a threat like that. Not enough cases.
▶ 1:05:59Mr. Finta: Now if we got to the point where we have in other instances, for example our joint terrorism task forces, where state, local, federal agencies are working together with representatives from the private sector to share information and to advance these cases to the point where they become effective and we can do more of them, the culmination of this across the country if we had more of these taskforces would inform those decisions we
▶ 1:06:32Mr. Finta: Are trying to make overseas. We would have the intelligence we need with more of those cases, with more of those arrests, with more of the intelligence. It is definitely within our grasp.
▶ 1:06:41Sen. Gillibrand: So you are saying you need more personnel and investigative resources. Is that what you are saying?
▶ 1:06:47Mr. Finta: Yes, ma'am. Similar to the crimes against children task force, which is predominantly staffed with local police departments. Where those local and state resources can be used to support larger federal and international investigations, the effect of that is much greater then the individual investigations in local territories.
▶ 1:07:12Sen. Gillibrand: Usa and you want to deputize local law enforcement to help?
▶ 1:07:16Mr. Finta: Absolutely. If there was an ejtf, elder justice task force, in every major city in the united states.
▶ 1:07:27Sen. Gillibrand: That allows you to deputize local law enforcement?
▶ 1:07:30Mr. Finta: Absolutely.
▶ 1:07:31Sen. Gillibrand: I will work on that with you. What about tech? Do you have the appropriate technology? A lot of these scammers rely on voice recognition systems. They do deepfakes for voice, photographs, bank accounts, a letter from your bank saying you to update your password. They are very sophisticated. Do you have the tech you need? Do you need technology support?
▶ 1:07:56Mr. Finta: Again, I will remind the chamber that I retired from the fbi. The fbi does grow and change every day, but it is government. That is why I think it is so important for that relationship and partnership with the private sector to bring cutting-edge current tech from those companies in on this fight. I think it is a good option that would replace huge results.
▶ 1:08:24Mr. Finta: If we brought tech companies, banks, retailers, and telecoms together, stacking that sort of evidence and intelligence would create an avalanche of positive cases and intelligence.
▶ 1:08:39Sen. Gillibrand: Mr. iacovella, what steps should congress take to address continued investment by p.r.c. Companies by state and local pension funds? And are there any scenarios where the fiduciary duty owed to the pension funds may conflict with the national security concerns at a federal level?
▶ 1:08:59Mr. Iacovella: I think congress should take steps to ban p.r.c. Investments. I think the fiduciary duty that is owed to the beneficiaries is very difficult to comply with because diligence in that country is nonexistent and you don't know whether or not the financial reporting, as kevin said, is actually true and accurate because the chinese communist party will serve a security privilege or national state secret.
▶ 1:09:29Mr. Iacovella: That is why they should be banned.
▶ 1:09:30Sen. Gillibrand: Thank you. Thank you, Mr. chairman.
▶ 1:09:33Chair Scott: Thank you, ranking member gillibrand. Ranking member krishnamoorthi.
▶ 1:09:37Rep. Krishnamoorthi: Thank you, Mr. chair. Let's first take a look at these scam factories in southeast asia many of them are in burma along the border with china. The fbi understands from thai intelligence these centers are havens for chinese mafia engaged in fraud and criminal acts. Right?
▶ 1:09:56Mr. Finta: Yes, I believe that is true.
▶ 1:09:59Rep. Krishnamoorthi: And the ccp could work with local authorities in burma to shut them down come about for years, ccp inaction allowed the syndicates to flourish, right?
▶ 1:10:07Mr. Finta: Absolutely.
▶ 1:10:09Rep. Krishnamoorthi: And as long as these centers, these scam factories continue to operate, the scammers will continue to target older americans, right?
▶ 1:10:16Mr. Finta: No doubt.
▶ 1:10:18Rep. Krishnamoorthi: Let me turn to my next topic. It may not come as a big surprise, but the pictures that elderly americans are getting scam texted every day are not actually the people texting. On the chinese internet, criminals steal hundreds of photos of real people from their social media accounts and then impersonate them with their stolen photos. So Mr.
▶ 1:10:43Rep. Krishnamoorthi: Finta, as you can see behind me, you can buy packages of hundreds of these photos for just about $11 on the chinese internet.
▶ 1:10:54Mr. Finta: Yes, sir.
▶ 1:10:56Rep. Krishnamoorthi: And using these fake personas, chinese cyber gangs then target older adults and convince them to drain their savings. The ccp says they can't go after the scammers themselves since supposedly the scammers are seeking refuge in southeast asia. But Mr. finta, websites like these were scammers sell photos of unsuspecting young women are chinese websites, right?
▶ 1:11:22Mr. Finta: I believe that is true. And it is common among the transnational organized crime groups to sell all kinds of information back and forth between different groups for different levels of exploitation.
▶ 1:11:34Rep. Krishnamoorthi: And the ccp with a flip of a switch could take these down, right?
▶ 1:11:38Mr. Finta: I don't know the technical side behind that, sir, but I think they have great capacity to impact that.
▶ 1:11:44Rep. Krishnamoorthi: So the ccp could stop this, but they are not. And through their inaction, they are complicit in the bankruptcy of countless older americans, right?
▶ 1:11:52Mr. Finta: I don't disagree with that, sir.
▶ 1:11:55Rep. Krishnamoorthi: Now I would like to turn to my last topic. I want to turn your attention to a surprise guest witness, daisy, who I mentioned in the open. I had the chance to actually video chat with her yesterday. And she even gave me a compliment. Can you play the video? Yes, can you see me now? >> yeah, hi, wow.
▶ 1:12:18Rep. Krishnamoorthi: Hi, daisy. How are you doing? >> you are so handsome.
▶ 1:12:24Rep. Krishnamoorthi: It is nice to talk to you. As you can see, davey is pretty convincing and engaging, likely enabled by ai come alive face filters, or deep eggs. The conversation quickly switched to investment. I had a question for her. I said, how much do you want me to invest? >> you can start with a small amount. Right? Can start with $100 or $500. But it is up to you. You know what I mean?
▶ 1:12:54Rep. Krishnamoorthi: This is how people in scam compounds prey on older adults.the scammers start small and gain their trust and then butcher them for their life savings. I then asked plainly, is anyone making you do this? Her response was not pretty. >> no one asked me to do it. I just do it by myself to make a profit by myself. You got it?
▶ 1:13:19Rep. Krishnamoorthi: We then gave up the jig.
▶ 1:13:24Sen. Krishnamoorthi: Is it a scam compound? >> stop it. They can help you --
▶ 1:13:37Sen. Krishnamoorthi: They can help you there. What is unfortunate is this person pretending to be daisy could have been trafficked or kidnapped and forced to work in a scam compound. Like we need to protect older americans from these scams, it seems like we need to stop human trafficking that enables these scams.
▶ 1:13:59Mr. Finta: I couldn't agree more. If we worked together as a country and put all those resources in one basket we would have more effect at making that happen.
▶ 1:14:09Sen. Krishnamoorthi: We have to protect our seniors, but if we could stop the flow of human trafficking, the people working at these scam factories, we would be shutting down the scams. I call on committees to work on these together and for all americans to be vigilant. I yield back.
▶ 1:14:36Chair Moolenaar: Chair recognizes representative hood.
▶ 1:14:41Rep. Lahood: I want to thank our senate colleagues. I wanted to try the water in the senate. We appreciate you having us here. Thanks to our witnesses for your testimony on this important topic. America's global innovation leadership matters.
▶ 1:15:05Rep. Lahood: Chinese leaders recognize foreign know-how and capital are fundamental to their malign activities to unfairly bolster china's own domestic technological including ai, robotics, quantum and semiconductors. We have talked in the select committee a china, they have land to lace the united states and they are working on it every day area they want to beat us technologically, economically, militarily and diplomatically.
▶ 1:15:34Rep. Lahood: The sooner we wake up to that the better. Unlike our democracy, the sisi you can dictate and arbitrarily direct industrial policy as it relates to funding towards technologies they believe are most important. We have seen that with ccp subsidies and research rising six times -- faster than the U.S..
▶ 1:16:00Rep. Lahood: The ccp plays by different rules than the rest of the world and has a track record of its lighting U.S. investments -- exploiting U.S. investments and developing chinese best -- military and intelligence that undermine U.S. national security. New restrictions on access to U.S. capitol capital and expertise could hinder the ccp's ability to innovate technology. We have bills in the house we are looking at.
▶ 1:16:31Rep. Lahood: The U.S. must continue to create new tools to curb U.S. investment in ccp high tech sectors and prevent U.S. capitol from being used to embolden the ccp's military. I will start with Mr. o'leary. We have heard from a couple of our members on the ccp's use of golden shares as a vehicle. It seems to be a vehicle for party control inside private companies.
▶ 1:17:00Rep. Lahood: From your vantage point, are there private companies in china that have the ability to use a request from the ccp over business decisions under the structure?
▶ 1:17:10Mr. O'Leary: I'm sure they have the right to do that and then you don't hear from them anymore. That is what I think happens. It is a jack ma situation. You have to toe the party line. Those are the rules. He was a successful entrepreneur and he disappeared for a while. I think that is how it works.
▶ 1:17:34Mr. O'Leary: If you refuse to cooperate with the golden share participation, they are settling down to 1% with effective super rights with the 1% and I'm not sure you can go to your counsel in china and say I would like to litigate this in court. In fact I'm sure you can't. That is what you would do here.
▶ 1:17:57Mr. O'Leary: If the government said to me you will sell, we will sell our holdings and keep 1% and we will tell you what to do every day, I would say let's go to court. That is why people invest, because there is an appellate system and check and balance are crazy ideas like that. My answer would be, there is no difference between a public or private company in china. There is just the golden share. That is it.
▶ 1:18:27Rep. Lahood: While the U.S. funds most, more basic research than china, china investment is rising six times faster and is expected to overtake the U.S. and spending within the decade. How can we support the development and fostering of innovation and bolster america's leadership in this international competition?
▶ 1:18:49Mr. Iacovella: I think one of the first things we can do is prohibit american money from continuing to fund chinese companies and their innovation and military rise. That is my big concern and what I tried to articulate, we have companies on the commerce list, the dod list on the human rights list.
▶ 1:19:11Mr. Iacovella: These should not have access to our capital markets, should not have access to be able to do business in this country but for some reason they continue to be able to take american investor money and fund their rise. It is like walkable where we put cash whack a mole where they create a subsidiary and that subsidiary gets money in our capital markets. Whatever congress does it has to be very crystal clear on the prohibition.
▶ 1:19:38Rep. Lahood: I yield back.
▶ 1:19:40Chair Moolenaar: Thank you. Thanks for being here today. I'm a senator from ohio. And I wanted to talk a little bit about ai. Senator rosen and I have a bill that would prohibit deepseek from being on any federal devices.
▶ 1:20:11Chair Moolenaar: I have concerns over health, we talk about the scams with seniors and foreign adversaries like china are exploiting our freedoms. We allow technologies to freely flow in america while they prohibit those technologies from being available to their population. Mr. o'leary, I know you have a lot of experience looking at these investments in china. And abroad.
▶ 1:20:41Chair Moolenaar: Do you have thoughts on ai, particularly deepseek or anything in that space? How our freedoms, how chinese government and chinese businesses are perhaps exploiting our freedoms and what threats ai pose for seniors and scams that could be perpetrated in america?
▶ 1:21:03Mr. O'Leary: This is a good point. The issue around ai competition, it is my belief that the country that advances ai the fastest with the most capacity is the safest from a defense point of view. I don't care where warfare goes in terms of technology, it will be driven by ai.
▶ 1:21:26Mr. O'Leary: Predictive outcomes in a war scenario, if I were china I would want to be the most advanced as fast as I could in a to prepare for warfare in the future. Do we have the most advanced ai? You can see the effects, we talked about fraud but you can see the propaganda as of the eight hours on tiktok, remarkably generated images of overweight americans at sewing machines. That is ai driven.
▶ 1:21:55Mr. O'Leary: The challenge we have, it is worth its own investigation, the country with the most power wins ai because you have to build giga size data centers. In america we have a demand for 45 gigs, five on direction. What holds us back in north america's permits and power. If you go to any authority in any state and ask for giga power you can't get it.
▶ 1:22:28Mr. O'Leary: Our grid is maxed out. China has solved this with coal powered electric plants generating tremendous electricity. They don't have a problem with permitting. The government finds land, to build the facilities and they power it over 1.4 gig of power. They were able to advance deepseek so quickly because they got the power to do it.
▶ 1:22:55Mr. O'Leary: You have heard warnings about this but ai should be earmarked as a number one issue for defense. That is what I think it is. In every way including propaganda. If we don't have the best ai, we will not be will -- winning militarily in the future.
▶ 1:23:12Sen. Husted: That is a good point and if you study the history of the world, the nations that are the most military and economically dominant are those that are the most innovative. New technology from the beginning of time have advanced as military weapons that allowed for nations to conquer or be conquered.
▶ 1:23:36Sen. Husted: It creates the same opportunity from an economic point of view because militaries are built through the revenue and growth of a nation's economy.
▶ 1:23:44Mr. O'Leary: And the tech.
▶ 1:23:45Sen. Husted: The tech is financed from that economic dominance so economic dominance begets military dominance which traditionally has been helpful, economic dominance and conquest in setting the rules of the game for global competition. Our gentlemen who are with us today, do you have thoughts on those issues?
▶ 1:24:14Mr. Iacovella: We could go back to what kevin was talking about at the beginning, the playing field is not. Our companies are on a unlevel playing field to access capital. Over there, it may never come back. Xi makes a decision on that is gone. We don't know how deep and how far the investment ecosystem is in private equity, in pensions.
▶ 1:24:46Mr. Iacovella: It is in mutual funds. Any of these that hold chinese companies can go to zero tomorrow if xi decides to do so. That is the scariest thing from my perspective.
▶ 1:24:56Sen. Husted: I am out of time. But I will say to this point, these technologies in a free society, that are yielded by our adversaries and people within those nations who will not police the rule of law, can be weaponized against our citizens and in this case, our elderly citizens in this nation. We have to wake up to it and I appreciate your thoughts.
▶ 1:25:24Sen. Husted: The chair represent -- recognizes representative pastor.
▶ 1:25:30Rep. Castor: I apologizing if I'm squirming in my seat. Like our neighbors across america are suffering whiplash because of the economic chaos inflicted upon us by the white house and the president over the past two weeks regarding the import taxes and the sheer chaos of not knowing what is coming next.
▶ 1:25:59Rep. Castor: The subject of this hearing, that kind of chaos empowers the chinese communist party. That emboldens them to continue their malign economic abuse of our seniors in this country, our businesses. Our allies, our friends.
▶ 1:26:22Rep. Castor: The chinese communist party, they know these fraudsters and sophisticated scammers target older americans to steal their hard-earned cash. Especially poignant in a state like florida where 20% of the population over 65.
▶ 1:26:43Rep. Castor: In the latest report to congress regarding protection of older adults, the federal trade commission stated older adults reported losing more than $1.9 billion to fraud in 2023. That is just the cost of the reported cases. The vast majority of frauds are not even reported. I heard you, Mr. finta, talking about your parents. I hear these same stories from my mother and her friends.
▶ 1:27:14Rep. Castor: They feel like they are over the barrel, they are being prayed upon and they are unsure what is coming at them next and they want help. The problem is the white house is not just causing economic turmoil and uncertainty. They are also going after the cops on the beach, particularly the department of justice and the federal trade commission, which is one of our premier protection agencies.
▶ 1:27:43Rep. Castor: It has a critical role in fighting fraud. It gets more complex all the time. To divert resources from a federal trade commission that has grown expertise over time to tackle this kind of abuse, it doesn't make sense.
▶ 1:28:02Rep. Castor: Here is a glaring warning light, not just the economic turmoil caused by the president, but what he is doing, the fact the republicans in congress are not standing up to keep the cops on the beat at the federal trade commission, we are talking about investigators, enforcers, and the president even went so far as to attempt to fire commissions just the democratic
▶ 1:28:32Rep. Castor: Commissioners at the ftc. Here is the problem. Congress in a bipartisan way a few years ago I established the ftc as an independent bipartisan enforcement agency. They have a long history of defending consumers. When you take the cops off the beat and say we don't even want you to operate, you are hamstringing our own selves, our ability to counter the ccp and all of their malign efforts.
▶ 1:29:02Mr. Finta: , in your testimony, you said and in your exchange is senator gillibrand you said we need to double down. We need to recommit for the department of justice and wouldn't that include the federal trade commission, where we have experts that are ready to go on task and work to counter the chinese communist party and the fraudsters?
▶ 1:29:27Mr. Finta: The ftc would be an essential partner in this society approach, this task force. Historically, which -- with each agency regardless of cutbacks and changes, working independently, we continue to lose. The problem keeps getting worse.
▶ 1:29:53Mr. Finta: Probably the bigger issue is establishing a working relationship that includes the ftc, other law enforcement agencies, and the private sector to share the appropriate amount of data to have effect, which hasn't been the case at an effective or impacted level at the past.
▶ 1:30:12Rep. Castor: I agree. Thank you chad are witnesses helping us to call out these scammers and fraudsters. We all have to recommit and definitely not take the cops off the beat and create economic turmoil that pushes people into the arms of the chinese communist party. >> thank you.
▶ 1:30:37Rep. Castor: I know it is probably confusing with folks running to vote and getting back here to the hearing and who is chairing the committee? So I'm probably taking over chairing the committee. I'm senator moody from the tampa bay area. Like my house colleague who represents t tampa bay area, I was an attorney general for a long time in florida, and one thing I worked hard against were scams affecting senior citizens. It was one of my top priorities.
▶ 1:31:09Rep. Castor: There is no doubt some of these are emanating from china. What I think has leaders from both parties struggle, just like the public struggles with, is understanding exactly how china and the chinese government is operating to undermine american interests. I believe american strength and security.
▶ 1:31:37Rep. Castor: In fact, I lunched a bill that sponsored, one of my first, which was sadly to not issue visas to chinese nationals that want to come here on student visas because over the past few years, we have had to arrest so many chinese nationals on visas that were sneaking onto military bases, taking pictures. It has happened in the state of florida.
▶ 1:32:05Rep. Castor: It should be no surprise if anybody was following it, but china passed laws just before the biden administration, the first one was all chinese nationals have to cooperate with matters of national security and if you are a chinese national, you had to participate with intelligence gathering or face consequences. Why we are issuing visas to chinese nationals coming over here makes no sense.
▶ 1:32:29Rep. Castor: We are inviting agents of the ccp into our country when they are obligated by law to gather intelligence. That seems a simple step to me, something we can do as leaders and what I have been fascinated with and appreciate is your testimony and experience in identifying ways china is acting, undermining america's interests. I'm grateful for president trump putting america first and part of that lies in, Mr.
▶ 1:32:57Rep. Castor: O'leary, you are saying people think they are investing in chinese companies and in fact they are investing in ways that may undermine their own interests. You have been gracious enough to give time and talk to other senators about that. We have discovered things over time and I will go back, we cut them setting up police stations in our country.
▶ 1:33:26Rep. Castor: We caught them stealing intellectual property from our universities and setting up institutes within our universities. There are ways we have tried to reveal these very directed, specific targeting of undermining american interests. I will turn my first question to Mr. o'leary.
▶ 1:33:48Rep. Castor: You discussed how american investors essentially own nothing in china and how the ccp government maintains an ultimate veto over its companies. In your view, what efforts can we do to convince our colleagues and the american people that the government of china cannot be trusted as long as we are willing to tolerate the totalitarian regime in beijing?
▶ 1:34:10Mr. O'Leary: Step one, which I think will be the easiest path to resistance, is enforce existing laws particularly in capital markets, where those of us that are compliant have to compete with entities that are not. If you have a golden share or if you have a gap statement that is transparent over the last 24 months, you will get delisted. That will be billions of dollars evaporated off our exchanges.
▶ 1:34:41Mr. O'Leary: I think that is a wake-up call to china, which must become the eighth member of the g7, if they want to play with the big boys they will have to play by the rules. Everything stems from capital. You can't build an economy all on your own.
▶ 1:35:00Mr. O'Leary: You have to get access to capital and we have provided an amazing platform for china to tap into the world's greatest economy from a consumer basis with consumer products and also the rule of law to raise capital. That has not been fair. It has not been a level playing field. To be sure, I want to invest in china and I want to compete with china and be able to sell products to chinese consumers.
▶ 1:35:29Mr. O'Leary: I've got nothing against chinese consumers. I feel american technology and innovation can compete anywhere and I want to compete on a level playing field. We need to impose a level playing field. The only way to do that after watching for 20 years and multiple administrations, not only domestically but internationally, nobody has called them to the rug. Nobody said ok, you are not complying.
▶ 1:36:00Mr. O'Leary: All they have been taught from us is, there is no consequence. You can do whatever you want and you don't pay the price. That is our message for 25 years. I'm only asking for one voice. When is this going to change? When?
▶ 1:36:21Mr. O'Leary: If it doesn't change now, they will continue to take advantage of us in every way possible, including ip theft which I bet you, this is a personal opinion, you give me any chinese technology that is advanced and reverse engineer it, I will show you american code from some decade. I swear to you I believe that. We never did anything about it then and we are not doing anything about it now. We are here to say it has to stop.
▶ 1:36:51Mr. O'Leary: We are the guys on the front line. We are dealing with this, and it is not fair. I'm just asking to impose existing laws. If you do that, believe me, those boys are coming over here on an airplane. You can't cut off people from the united states market, the largest capital market under and without a consequence.
▶ 1:37:11Rep. Castor: We appreciate you being part of the process where we are calling it out. And conducting a senate hearing, a joyce -- a joint senate and house committee. Senator scott has used this committee to tackle some of our most challenging issues, not only confronting threats from china, from the opioid crisis?
▶ 1:37:39Rep. Castor: Do we confront the most pressing issues facing seniors. Thank you for coming back so I can pass the gavel back to you. I appreciate it.
▶ 1:37:52Sen. Scott: We have a lot of votes this afternoon. >> I wanted to start with you. As I prepared for the hearing, wanted to get a sense of the magnitude of the problem we face and every one of us recognizes we don't know the extent and scope of what we are dealing with. Your testimony I thought approaches with a sense of humility, he said I believe 10-15% of elder fraud victims report the crimes against them.
▶ 1:38:25Sen. Scott: I wanted to start, are there best practices that you have seen? Are there steps we should be taking to make it easier for the reporting or try to have a better handle, try to better encourage people to come forward and making sure we know what we are dealing with?
▶ 1:38:43Mr. Finta: Thank you for the question. It is a great opportunity to talk about what should be as opposed to what is right now. Unfortunately right now in the U.S., the reporting is remarkably low. One of the other consequences of the crime itself is that a lot of our seniors would prefer to report to their local police departments.
▶ 1:39:15Mr. Finta: When you walk into a police department in the U.S. and say my mom or my dad or myself was the victim of a pop-up ad on the internet where I went to a digital currency atm and sent money overseas, unfortunately the vast majority of the time, what you will get is I'm sorry, there is nothing we can do. You should call the fbi or file claim.
▶ 1:39:45Mr. Finta: Can you call the fbi as an individual or hsi or you file a claim with the internet crime complaint center, you are viewed essentially as an individual who lost $30,000. Could be your life savings. Unfortunately there are hundreds of thousands of those complaints.
▶ 1:40:07Mr. Finta: Without a real combined effort to aggregate really analyze and work the most pressing complaints, with private industry partners, we are pushing the rock up the hill as law enforcers. It is not -- does not encourage people to report when they don't see the effects of them.
▶ 1:40:34Mr. Finta: We file a complaint and the complaint doesn't get worked, you are not called to testify at a sentencing hearing. Supportive coda -- >> the volume is too large to investigate under current circumstances. I wanted to ask are we thinking about it in the right model? I was about to ask, how do we put resources towards this?
▶ 1:41:06Mr. Finta: Instead of constantly feeling like we are going to scratch what is actually there, in terms of what you experienced, are we successful in addressing the complaints we had? Or is that not the right direction in terms of being able to put our resources towards it?
▶ 1:41:24Mr. Finta: With any large problem there has to be multiple approaches to combat it. This is one of them in terms of investigation and enforcement. I do believe if we construct, because I had great success locally on the elder justice task force in san diego county with 13 police departments all participating, with private industry participating almost in real time.
▶ 1:41:52Mr. Finta: It is effective as a model if you proliferate that across the country so the combined results of 50, 100 ej tf's around the country would have a disincentive effect on those groups overseas and the people you're facilitating these crimes.
▶ 1:42:17Mr. Finta: >> so you are saying if you can replicate that type of structure and have it scaled across our country, it would still need to be some type of coordinating body? Is that something that you see within the fbi or something at a federal government level to coordinate across?
▶ 1:42:36Mr. Finta: That is a good question. And that is outside of mine laying in terms of speaking for other agencies but when it comes to national elder coordination centers, to aggregate the data from U.S. companies, we do have amazing resources to support those types of investigations. That would be a game changer. >> I'm out of time so I will yield back. >> thank you.
▶ 1:43:09Sen. Justice: First of all, thank you to all three of you for coming. And for your testimony. I didn't get to hear, we have been running back and forth with all of these votes and everything but I've got to tell you this. Kevin, we have become real friends and what an incredible man this man is.
▶ 1:43:35Sen. Justice: I have had him in my office in charleston in the governor's office and I had the opportunity to be the governor of west virginia for eight years and I can tell you that I can speak frankly and say I don't know that anybody has been in that office that is more credible than this man. I appreciate our friendship, he has done everything that he said he would do. Even to the point when he called west virginia a winner state.
▶ 1:44:08Sen. Justice: I would say this. If west virginia is a winner state, I love the contest of ballgames and everything. But we can't possibly say we are winning, we are absolutely waiting when it comes to china. I can't see how anybody could say that in a fair way. I can honestly say this.
▶ 1:44:35Sen. Justice: One of these companies, I hope I'm not stepping out of my bounds but in november of last year, we were sitting in a location in fairmont, west virginia and he said we will make this a go now. I think they are scheduled for june.
▶ 1:44:59Sen. Justice: From november until june, and absolutely they are pulling it off, so like I said as far as credibility, he has not only my boat but many, many in this great state of west virginia. With all that being said, kevin, as your friend, I would ask this because we have a lot of elderly in west virginia. Those retirees are absolutely being bombarded in a lot of ways.
▶ 1:45:30Sen. Justice: I thank you for bringing awareness, all three of you, awareness to a real problem in this country that we know about but we don't seem to do anything about. Kevin, a minute ago, said just that. We know about it. For god sakes, this can't be that hard. We know about it. And we don't do anything about it. I don't get it.
▶ 1:45:58Sen. Justice: I'm a new kid on the block here but I'm a kid that abounds in common sense and logic and goodness and truth. So I've got one question and it is just an echo of the same question but it basically says this.
▶ 1:46:16Sen. Justice: It says the lack of transparency , financial representation, ties to human rights violations, and scams are just many of the reasons why investing in chinese companies has become a real and unique threat.
▶ 1:46:36Sen. Justice: What can individuals in west virginia, the residents of our great state, do to help protect themselves and their retirements and their pensions and, from these financial threats? Please, kevin, if you would, you probably have already given us a bunch of advice. Please tell us more wisdom.
▶ 1:47:00Mr. O'Leary: I feel that the incentive for these hearings, with other members, is to enforce existing laws as they stand. We will end up in a much better place in terms of our relationship with china because they are a larger country, we are larger and there is a chance to work on this.
▶ 1:47:26Mr. O'Leary: I might add that my phone has been leading up, the market is up 3000 points because the tariff situation with the rest of the world, although chaotic, is getting organized. It seems that way. 69 countries coming to the table and maybe we wind up with zero, I don't know. China is not the same. It is not the same. We have to resolve the issues we have been talking about is part of the negotiation.
▶ 1:47:54Mr. O'Leary: I don't care if we get to 400% tariffs on china. The thing I care about is getting them to the table to resolve these issues and make it safe for every american to invest there or do business with them including west virginia, and this is changing by the hour but now I'm starting to see what is happening and so is the market. The world is one thing. China is completely different.
▶ 1:48:23Mr. O'Leary: Tariffs are used to get them to the table to -- to level the playing field and all of us involved applaud it, I can assure you. I am the voice of millions on this doing the business there. Something else west virginia can do that I think will come into the highlights pretty soon as we get into this ai competition with china, there are very few states were locations in america or mexico or canada, that have as much natural gas as west virginia.
▶ 1:48:56Mr. O'Leary: That is pure gold for aion. -- for ai. In working with your government, you perp -- permits quickly for the plants. Do the same thing in ai development. Allow companies to come there, tap the stranded gas, bringing the turbines, build the facilities, and light up ai.
▶ 1:49:22Mr. O'Leary: You can't do that in virginia because of rules and regulations that aren't allowing gas turbines to work in conjunction with diesel backup generation. So the sites in west virginia become prime real estate for ai. You will transform your state's economy by embracing energy, because we don't have enough.
▶ 1:49:47Mr. O'Leary: You have senators there, there are lots of other people in your government in west virginia that understand the opportunity is huge. It is absolutely huge. Demand is insatiable, you have to move at the same speed you did and I'm just one investor in west virginia. It was a winner state because you got stuff done and everybody has to have that message.
▶ 1:50:08Sen. Justice: Thank all of you for being here today.
▶ 1:50:16Sen. Scott: What if there was a company called weather tech and they produce really nice mats for the car?
▶ 1:50:25Mr. O'Leary: I have them in my f-150.
▶ 1:50:30Sen. Scott: And they woke up one day and looked on ali baba and they saw their products were being sold on ali baba. They looked at their shipping and they had never done any business with ali baba. They looked just like the mats they produced in illinois, but -- and they even had their name on it.
▶ 1:50:54Sen. Scott: What could they do to stop this theft of their product that they got nothing for? What would be their recourse right now?
▶ 1:51:04Mr. O'Leary: There is nothing they can do. You have just told the story of a million small businesses in america over the last 20 years. They innovate, they create, they are entrepreneurs, they prove their product in the american consumer market, and around 5 million in sales, they are knocked off by who? China.
▶ 1:51:31Mr. O'Leary: Often, the same plants that ran the molds under the relationship they had with the company, lots of companies went to china 10, 20 years ago and put their molds therein during the day the company would run the weather tech matt and at night they would run the knock off. They would bring it into the market and 30% off retail of weather tech. I have seen this happen countless times.
▶ 1:51:58Mr. O'Leary: In some cases with the company is small they go out of business. Nobody hears the tree falling in the forest. It happens thousands of times. There is an immense opportunity to enforce existing laws but at the end of the day, the reason the company couldn't do anything about it, they have no access to the chinese courts. They can't resolve the complaint through litigation as we do here.
▶ 1:52:23Mr. O'Leary: So my recommendation is, if you are a chinese company and you want to use our courts to litigate your complaints, sorry. Not until you open yours. We would love to work with you but unless it is a reciprocal, the idea of today's conversation was to get to a reciprocal playing field, and even playing field. American companies have always been very competitive.
▶ 1:52:47Mr. O'Leary: Anywhere on earth, when given a chance on a transparent and competitive laying field. That is not the case in china. We are saying the same thing, it has to get fixed and finally, here we are with tariffs being the excuse but now I think xi has to come to the table and I hope it happens. I would like to see tomorrow morning, 400% tariffs.
▶ 1:53:13Sen. Scott: Let's say there is the same company, weather tech and they know ali baba is selling in the U.S. to american consumers. They would not be able to get money out of ali baba here?
▶ 1:53:26Mr. O'Leary: . They can try. Sometimes it is a big enough case. Amazon is better, if you can prove you own the ip.
▶ 1:53:37Sen. Scott: But they couldn't get any damages?
▶ 1:53:38Mr. O'Leary: I have never heard of the case resolved to the satisfaction of the company making the complaint, ever. There might be a case I don't know of at the wto is supposed to provide this platform. Find me one year since 2020 where there hasn't been a plethora of complaints exactly like the one you detailed. There have been no consequences. None, zero.
▶ 1:54:03Mr. O'Leary: The chinese economy has done very well on the back of stolen ip, and ripping off tech and using products at lower price points that they have made themselves based on american ip. It has to stop. I'm sure most chinese people would love to compete. There are great chinese entrepreneurs. They don't need to cheat and steal. We just need a level playing field.
▶ 1:54:32Mr. O'Leary: I would love to see this resolved and I hope it happens. But I say, and what I have learned and what I have seen in my long career, china understands only one thing. The stick. Give them the stick.
▶ 1:54:49Sen. Scott: Hopefully today we will confirm a new chairman to the securities and exchange commission. What would you ask him to do? What do you think his responsibility is? I used to take companies public. When I took them public, I had to have financial statements, I disclosed all of the material information, right? So we enforced it.
▶ 1:55:14Sen. Scott: I had to do it when I took things public and sold securities and I had to do with with my 10 cues and 10 caves every quarter and every year. He will probably be sworn into office tomorrow. What should he do?
▶ 1:55:29Mr. O'Leary: I assume you are referring to paul adkins. He should go back to the files and execute the mandate the law has given him. There must be dozens of companies that are offside right now in compliance, dozens. They should have been delisted two years ago and they are still trading, still raising capital and competing with people like me for that money. They are not compliant with cap. There is no way I could do that.
▶ 1:55:59Mr. O'Leary: I would never have that opportunity, but they do. All I want from him and I think you will hear a lot of people say the same thing, you have this mandate. Enforce it.
▶ 1:56:09Sen. Scott: What about these wall street firms that say, american investors want to invest in these companies and if we don't allow them to invest in american stock it range through american stock exchange they will go somewhere else. What would your response be to god? ?
▶ 1:56:27Mr. O'Leary: What will happen? This is the case in almost every regulator, the seven biggest regulators on earth. They speak with the fcc weekly. Everybody complies with a law that is implemented and enforced in america in one way or another. They don't want to be offside with the world's largest capital markets. It is not that they like us. They want access to the largest capital market.
▶ 1:56:57Mr. O'Leary: The reason the adg in abu dhabi doesn't want to get involved with companies that are not compliant with the sec or whatever body in the U.S. is because they want access to the world's largest and most liquid capital market. They don't want to ever be offside. It is the strength of america and the access to the market, the largest consumer market that gives it, the strength and it hasn't used it.
▶ 1:57:30Mr. O'Leary: This administration finally, a lot of people don't like the style of the president, I get it. The way I look at it, I don't focus on the noise, I focus on the signal. What I'm hearing is, enough. And we will enforce the laws. That is probably a good outcome for everybody, although watching the market go up and down 3000 points per day, people gnash their teeth but if that is the price, it is worth it.
▶ 1:58:01Sen. Scott: Chinese companies, we don't know what the financial statements are but it is never a problem. No one ever loses money. Is -- has that ever happened or is it just theoretical?
▶ 1:58:15Mr. Iacovella: It does happen. There are multiple companies, there was a pharmaceutical company where one day it was a growing concern and the next day it had a $15 billion hole in its balance sheet of that was because the ccp decided it was no longer a useful concern for it.
▶ 1:58:34Mr. Iacovella: That was part of some of the index funds, one of the reasons why we started to get involved in to answer, to add to what kevin said, they can go overseas if they would like to but there is no rule of law in hong kong, no rule of law in mainland china that stands up to our rule of law. There is something called the fiduciary duty which were wires you to do due diligence and investigate.
▶ 1:59:00Mr. Iacovella: You have an obligation to your shareholders to take into account reputational risk and geopolitical risk, and the fact that they might take over the whole board from a monday to a tuesday, or they might impose capital controls, which basically absorb all of the retained earnings at that company, that is too big of a risk to take as a fiduciary. I think that is a false argument. I have heard it multiple times and that is how I would push back.
▶ 1:59:29Sen. Scott: If an american investor, let's say 65-year-old woman invested in a mutual fund, invested in chinese stock and they lied and unfortunately they went to zero, the mutual fund would not take the money out of the poor lady's account? They would eat the loss themselves, wouldn't they?
▶ 1:59:53Mr. O'Leary: The fund --
▶ 1:59:55Mr. Iacovella: The fund would bring down --
▶ 2:00:01Sen. Scott: You mean the lady would lose money? The mutual fund bought the stock.
▶ 2:00:04Mr. Iacovella: That is right. That is why the passive index loophole is a problem. None of those companies comply with any of our laws, get american money goes straight into --
▶ 2:00:16Sen. Scott: The exchange the stock is traded on, would they take responsibility so the lady didn't lose money?
▶ 2:00:23Mr. Iacovella: If it was in the U.S. there could be recourse against not only the underwriters who brought the stock into our exchange --
▶ 2:00:32Sen. Scott: Has that happened? The underwriter who sold the stock of the company but didn't comply with gap has no liability in the U.S.?
▶ 2:00:42Mr. Iacovella: That hasn't been tested yet.
▶ 2:00:48Sen. Scott: What do you think the law is?
▶ 2:00:49Mr. Iacovella: With an american company the underwriter is liable. The exchanges are self-regulatory organizations which means they have legal authority to adjust their standards and they are supposed to protect the integrity of the marketplace. If they have companies trading on their market that aren't complying with U.S. laws, they do have some sort of regulatory obligation to remove them to protect the integrity of the market and the investors who trade on it. To date, they haven't done that.
▶ 2:01:19Sen. Scott: The underwriter has no liability, the exchange has no liability on the mutual fund has no liability so if they all did this, the only person holding the bag is the 65-year-old lady who thought she was buying into a safe mutual fund.
▶ 2:01:36Mr. Iacovella: That is correct, senator. >> can I add something? You made a great point. Let's say atkins delist a chinese company and it goes to the london exchange and says I got delisted up the new york stock exchange and I want to get listed here. I would think the regulator there would say can you tell me why you got delisted? We broke the law in the U.S. please come a command list here.
▶ 2:02:06Mr. Iacovella: If you are a mutual fund manager with a mandate, you aren't going to want to touch that company. Once they get tainted by breaking U.S. securities laws, that is attached to forever on the board. They will not escape it in any market on earth. It will make their shares worth 60% off retail. I'm not worried about anybody moving.
▶ 2:02:32Mr. Iacovella: Once they get delisted for breaking the law, they are radioactive waste in financial services.
▶ 2:02:37Sen. Scott: So if you were the new fbi director, a florida sheriff said to me we probably don't need a lot of help on bank robberies like we needed in the 1930's. What we need his help on international scams because we don't have ability to deal with those. What would your recommendation to the fbi be.
▶ 2:03:06Mr. Finta: I would recommend a reshuffle of resources to include treating these types of scams and fraud as transnational organized crime. At the moment, to some degree depending where you are, but generally they are looked out as a white-collar crime.
▶ 2:03:29Mr. Finta: The type of investigation, one conducts on white collar crime as opposed to transnational organized crime, tends to differ. Transnational organized crime has the ability to rope in agencies across the united states to assist. Which is what you need.
▶ 2:03:47Mr. Finta: When you have money mules in 14 states, victims in 50 states, actual organizers in a dozen different states, you need a team to work those types of cases.
▶ 2:04:02Mr. Finta: I would also step up the amount of interaction on a real-time basis with america's companies, with the private sector so the access to that data, where the evidence lies, happens faster, to increase the amount of accomplishment and a short period of time. We could do more cases with less.
▶ 2:04:29Sen. Scott: So things like bank robberies and other issues the fbi historically was involved in , notably local law enforcement has the ability to do on their own. If they said we aren't going to focus on that but we will focus on these international scams, would be fbi have the resources to put a lot of smart talent against these international scams?
▶ 2:04:57Mr. Finta: The fbi hires pretty well, sir. I think they have a lot of good, smart people that can do this. I will not speak for the fbi and what their resources are right now, just like we did with the health care fraud task forces in the past, I think it would be appropriate for congress and the senate to actually staff those with budgets, with requirements to say if we ask you to do this,
▶ 2:05:29Mr. Finta: We will give you the resources to do it but if we did as a country, we could accomplish a lot of good.
▶ 2:05:37Sen. Scott: Let's say I have a new company and I feel good about it and I want to take it public. Why wouldn't I pick, there is no real reason, I can pick any exchange in the world. What if I could, what I have any discount if I said I'm not going to do it here, I will go do it on the indian stock exchange or hong kong stock exchange or the shanghai stock exchange?
▶ 2:06:07Sen. Scott: Is there any reason why I would get more money in my trait -- and my trading would be more liquid if I picked an american exchange? Is there any reason not to do it?
▶ 2:06:22Mr. O'Leary: Every company on earth if given the option what either list on the new york's change -- exchange or nasdaq. The reason is the amount of capital that is invested in companies that have gone through rigorous compliance, transparency and regulatory laws, the fact that they could get indexed into the billions and trillions of dollars that are resting in indexes where the company might be included, the
▶ 2:06:55Mr. O'Leary: Largest index on earth is the s&p 500, the gold standard. The U.S. remains the gold standard for public listings. There are few exchanges that can compete. Most of the time, it if the company believes they are compliant they will see the availability of nasdaq or new york stock exchange listing first. Often they will try london next.
▶ 2:07:20Mr. O'Leary: But every institutional investor on earth, in one way or another, puts almost half their capital into one of those two exchanges. They are the largest on earth and they will remain that way while the rule of law is transparent and we have a balanced system and we actually enforce the laws. The american economy is actually based on confidence. That is what it is.
▶ 2:07:50Mr. O'Leary: And the belief that it is the most transparent legal system on earth. We have gone through a lot of issues around it, but we have had these issues before. Why is it that even adversaries want to invest their capital here? You have to ask yourself that. It is trust.
▶ 2:08:14Mr. O'Leary: So the answer is, more people, even adversaries, trust the united states than any of the country on earth and the way you can tell is how they invest their dollars. It all comes here. By not enforcing laws, we actually breached that trust. We should be humble when atkins comes in here you -- he is the steward of these laws.
▶ 2:08:45Mr. O'Leary: His mandate is to enforce them to show the world he and his mandate and the country in the system and the exchanges can be trusted. Anybody who doesn't enforce the laws was hurting the american brand, that is what they were doing. That has to be fixed. You don't want to hurt the american dream, the american brand that transcends partisan politics. It has to be maintained on the way you do that is enforce the laws.
▶ 2:09:13Mr. O'Leary: I'm hopeful you are right and that we will see a lot of delisting's and I'm looking forward to it and they can do the right thing and do like I have to, comply. Pay for compliance, hire a firm, pay the millions of costs to stay listed and I'm happy to compete with them.
▶ 2:09:30Sen. Scott: Ranking member gillibrand.
▶ 2:09:34Sen. Gillibrand: I want to thank you for your excellent testimony. Each one of you contributed a great deal of substance and ideas, house and senate, to work on a bipartisan basis to write legislation to correct some of these challenges and problems. Senator scott and I are chair and ranking on the senate aging committee.
▶ 2:10:00Sen. Gillibrand: The house committee members were special committee on aging on a so that was the area of differences in our questions but we have gotten great ways we can work together to protect the american dream and protect parents and grandparents to make sure they aren't continually targeted and absolutely scammed out of their hard earned dollars and retirement savings. So thank you.
▶ 2:10:27Sen. Gillibrand: I think your recommendations, Mr. finta, go to resources and collaboration with local law enforcement, with regard to creating specialized commissions to do this work, is very wise and thoughtful. Mr.
▶ 2:10:46Sen. Gillibrand: Iacovella, I appreciated your recommendations with regard to how we keep security firms safe, how we keep investments by our states to be protected and good investments. I think your insight is extraordinarily helpful. Mr.
▶ 2:11:08Sen. Gillibrand: O'leary, your insights with regard to how we incorporate, how we have laws that protect U.S. based companies, how we allow for U.S.-based companies to compete worldwide is important. I couldn't agree more that the stability of U.S. markets and the fact that people respect our law enforcement and the oversight and accountability they can provide in this jurisdiction is worth everything.
▶ 2:11:37Sen. Gillibrand: It is why people want to do business in the united states. Thank you all for being such important leaders and I appreciate the contributions you made to us and to this committee.
▶ 2:11:47Sen. Scott: We have a few house members coming back. Mr. o'leary, what if there was a company called bytedance that owned a subsidiary called tiktok? Congress made the decision they shouldn't do business because it was chinese propaganda. They were required to sell.
▶ 2:12:15Sen. Scott: If that happened, whatever the free market would be, they would sell at some price, right? What if the government of china had the right to say you can't sell it? What would be the spread of the value of something like that? You say you have to shut down in america, the parent company for tiktok, or you can sell to the highest bidder. What would be a rain?
▶ 2:12:47Sen. Scott: Would that be a material disclosure that was not made by the underwriters, required by the sec, enforced by the exchange?
▶ 2:12:59Mr. O'Leary: Tiktok is the most unique situation in american corporate history because I don't recall ever, company having a law written specifically because of the way it operates. I have never seen anything like it. I don't think in history we have had anything like this.
▶ 2:13:25Mr. O'Leary: Not only did congress pass a law specific to it, but the supreme court ruled 9-0 in further definition and resolution about what was intended by the law. However, it has 7 million american businesses operating on it, generating 15-17,000,000,000 in revenue.
▶ 2:13:48Mr. O'Leary: In a commercial environment that is in -- of interest to investors including me and others. This is the first time I have ever seen a private equity deal where the actual deal terms are written into a law in congress and the supreme court. I think it is unique. We need to interpret what the laws are to do the deal.
▶ 2:14:15Mr. O'Leary: We have a new 75 day period and I doubt there will be another one. But I think there will be a deal done according to the law. Markets clear at whatever price it has to be. The algorithm is as high as 40. Apparently it is clear to me today that there will be no algorithm in the deal.
▶ 2:14:41Sen. Scott: It is clearly changing value.
▶ 2:14:45Mr. O'Leary: It will be, the great thing about capital markets is it is an open price discovery. What -- once the rule is in place and the investors are there, it is going to be negotiated based on whatever the price is and I think that would be an orderly way to get this done. I would prefer to see it, and I think it would be better for markets to have the competition of this social media platforms as long as it was in compliance with the law.
▶ 2:15:18Mr. O'Leary: I have never seen anything like it and I think for me, it is the legacy deal of a lifetime. If I'm part of the solution I will be proud. Those 7 million small businesses , they are all shark tank seven -- second-generation entrepreneurs and we should protect them and make sure they survive this. It is not their fault.
▶ 2:15:50Mr. O'Leary: Whether it is lipstick or clothing or whatever the product or service is, they are generating --
▶ 2:15:58Sen. Scott: There is business. Congresswoman hinson.
▶ 2:16:04Rep. Hinson: It is great to be over here. We continue to see chinese companies systematically working around and taking advantage of our laws to boost their growth while cutting us out of the process. They have been playing long games. Too often we have been outmaneuvered.
▶ 2:16:25Rep. Hinson: As we have heard today, american retirements and investments have slowed directly into these companies that strengthen the ccp's surveillance state and in many cases are tied to forced labor violations.
▶ 2:16:41Rep. Hinson: That is why I reintroduced my bill, the protecting american industry and labor from international trade crimes act which empowers the department of justice, gives them the tools they need to better be able to go after the bad guys and detect, investigate and prosecute trade crimes especially those that are frequently committed by the sisi the -- they ccp. Forced labor violations come all the things the disadvantage american workers.
▶ 2:17:10Rep. Hinson: How do you, use ccp state subsidies and the dumping practices to distort our markets and hurt domestic producers particularly in rural communities?
▶ 2:17:24Mr. O'Leary: The number one way there is damage done is not abiding by ip laws. That is probably the most long-term damage that has occurred. It is small increments. Undoubtedly hopefully if you ask entrepreneurs over the last 40 years, you will find many companies that are knocked off of china. In some cases they are bankrupt.
▶ 2:17:53Mr. O'Leary: American companies that spend $10 million developing their product and r&d, and they will have to advertise that, they put it on the market and it is a hit. $5 million in annual sales generally you will make 15%-20% and you can support a family.
▶ 2:18:21Mr. O'Leary: The minute, particularly if it is weather tech or something simple that can be knocked off, china didn't participate in spending on the r&d, they did not participate in developing the molds at all. They simply let the american company prove the market and then they knocked it off. If that happened stateside, within hours we would shut it down. It is easy. You can hire a local lawyer. You can't do that in china.
▶ 2:18:53Mr. O'Leary: Inquiry mentally over the years if there is one thing we can change in the narrative, it would be to establish reciprocal ip laws and ways to litigate them and resolve complaints. Which was intended in 2020 with the wto agreement they agreed to. There would be punitive penalties if that wasn't abided by. The best penalty is disallowing access to american capital markets.
▶ 2:19:26Mr. O'Leary: >> in my district it was seed out of corn fields so you think about the ip and r&d that goes into it, they were caught in an iowa cornfield trying to steal the seed by the fbi. And they arrested someone in the united states. We need more resources to go after these people and actually enforce the trade laws we have on the books. Of course protect key industries from unfair competition and they come in and they let us prove the market and do all the work.
▶ 2:19:56Mr. O'Leary: I speak to everybody on the room on this, they don't think there is anything wrong with that. >> it is how they do business.
▶ 2:20:05Mr. O'Leary: It is not taught to them when they are young, that there is anything wrong with stealing ip because there is no consequence. The only way that a puppy, I don't want to use that analogy but -- but you have to get the stick out. >> this is about protecting small businesses and main street.
▶ 2:20:35Mr. O'Leary: Let's talk about the capital flowing from these companies. The fact they are able to trade on our exchanges. One example, the chinese firm with links to the -- also on the doa blacklist but still trading on the stock exchange. I sent a letter to the nasdaq asking why they are allowed to do this and remain listed. I want to think the chairman for his leadership on this and we try to hold them accountable and try to limit this.
▶ 2:21:04Mr. O'Leary: Given clear national security concerns, why are they still allowed to trade on our markets when we know these dollars are used against us?
▶ 2:21:14Mr. Iacovella: Hopefully a new sheriff in town 48 hours from now on they will not be. I really hope that happens. I will do a shout out for him when he gets confirmed. This is somebody who should be enforcing the law because this maintains trust in the system and I hope it happens. There will be very little consequences to public markets.
▶ 2:21:36Mr. Iacovella: A big wake-up call, other exchanges will look at this and I think there will be a reaction for china domestically to get on board. >> anything you would like to add? >> I think Mr. atkins will enforce holding companies accountable and we will have a real understanding of what the audits are supposed to be during the period when china was on
▶ 2:22:06Mr. Iacovella: Lockdown and supposedly they conducted audits on their auditing firms. There were privileges that prevented them doing what they needed to do and I think Mr. atkins is not going to tolerate that and hopefully these companies that have been on for almost two years that are noncompliant will be removed and it is possible the exchanges are seeing the wind shift and that they can take their own action
▶ 2:22:38Mr. Iacovella: And get them off the exchanges. >> thank you. I yield back. >> congresswoman takuda? >> thank you Mr. chairman and for your patience while we were voting on the house floor. Millions of americans, predominately syrians -- seniors, depend on social security and yet their website has been crashing repeatedly over the last few weeks.
▶ 2:23:08Mr. Iacovella: Outages have lasted as long as a day in some cases and there are confusing messages claiming ssi recipients are currently not receiving payments. This added time this administration is rolling out a new policy for identity improving that will require millions of beneficiaries to set up an account online or show up in person, adding to confusion. We know why this is happening.
▶ 2:23:30Mr. Iacovella: Elon musk and doge cut over 7000 jobs from the social security administration and are planning more, including 50% cut to the division responsible for their website and online platforms. During the crowdstrike outage we saw an uptick in online scams taking advantage, our own department of homeland security put out of litton warning about malicious activities.
▶ 2:23:57Mr. Iacovella: My concern is doge's reckless efforts to cut the technology division and roll out sweeping new policies that require seniors to go online are creating the same opening for scams to take advantage of seniors and threaten their hard earned benefits.
▶ 2:24:13Mr. Iacovella: Would you agree the online platforms are creating unnecessary uncertainty among our nations seniors and others on social security and crating opportunities for china to spread propaganda and for scammers to use this to exploit our elders?
▶ 2:24:33Mr. Finta: That is not my area of expertise in terms of the markets in the confusion. >> you deal with eventing fraud and abuse among seniors.
▶ 2:24:44Mr. Finta: Yes. >> right now seniors are concerned about security benefits as a result of mixed messages they are getting online with proof of their identity.
▶ 2:24:56Mr. Finta: Confusion tends to support criminal activity. >> they are not getting payments because they have gotten email messages that were incorrect, that they have failed to make changes, they have to go in person to create online platforms and in rural america you cannot always get physically to a site.
▶ 2:25:21Mr. Finta: If you have this opportunity to scammers, they are looking to exploit situations like when people are scared or when there are changes in systems or updates to malware, do you think this potentially could create an opportunity to exploit seniors given the confusion and lack of staff as was mentioned at the beginning of the hearing? People won't necessarily get someone answering the phone for hours if they call for help to social security. Is this a potential opportunity for scammers right now?
▶ 2:25:51Mr. Finta: There is no doubt given the opportunity, transnational crime groups would take advantage of that situation.
▶ 2:26:00Rep. Tokuda: If we had a situation where cutting tech staff that help maintain these platforms, are we not creating a more vulnerable environment for scams on our seniors and social security beneficiaries?
▶ 2:26:15Mr. Finta: I don't disagree with that statement.
▶ 2:26:19Rep. Tokuda: I see that I have used quite a bit of my time. I wanted to move on to reports we saw in february from "wired" that reported eight scams in the myanmar thailand area using star link portals to carry out operations. Between november 2024 and february 2025, over 40,000 logins to star link from known scam centers in the region.
▶ 2:26:50Rep. Tokuda: From your work protecting american seniors from fraud and other financial explication, as well as your law enforcement background, how important is it that companies like spacex and starlink and others have robust processes to crack down be an ally on preventing abuses of their systems that target american elders and retirees?
▶ 2:27:14Rep. Tokuda: It is my experience -- Mr. finta: it is my experience these companies have antifraud programs and do work toward those efforts. Individually it is difficult for those companies in my opinion to have that kind of success as much as we could if we had in all of government or all of society approach to supplementing those efforts. I'm not specifically familiar with the starlink process.
▶ 2:27:45Rep. Tokuda: A growing number of vendors are offering starlink as a solution for scam operators so we need to work with them to stop this fraud and abuse on our senior population. Thank you very much, Mr. chair. I yield back. >> thank you. Thank you for this unusual, unique but important bicameral hearing which underscores the threat we face.
▶ 2:28:15Rep. Tokuda: In february resto issued the -- president trump had companies address outbound investment into china. Congress has been focused on this in multiple congresses and I introduced the fight china act formerly known as the coins act to prevent outbound investment into chinese surveillance companies and it also aligns with the president's memorandum by taking both an entity-based
▶ 2:28:46Rep. Tokuda: Approach and a technology-based approach. This is important because sanctions do provide a multilateral effect but not all civil military fusion happens with just listed entities. We have seen quite a bit of venture capital and private equity flows into private, nonlisted entities and therefore a technology focus is important. Can you discuss why a law that prevents U.S.
▶ 2:29:14Rep. Tokuda: Outbound investment into both specific entities is needed, but also, clearly defined technologies of national security concern? Why is that second piece so important?
▶ 2:29:27Mr. Iacovella: Thank you for the question and we supported your legislation and like the approach you have taken because we thought you could turn up the dial on specific companies but needed to attack the entire sectors that are posing a national security threat and it is more than just public capital, it is private capital, venture capital, private equity and public capital but what is even more of an issue is you have companies that are
▶ 2:29:58Mr. Iacovella: Subsidiaries of subsidiaries of subsidiaries and one of the parents on the dod list or entity list and you cannot get to them unless you prohibit investment into those chinese companies so I appreciate your approach and I think we threaded the needle. >> do we want to give the private sector the red light greenlight approach but we think we can get at this problem by defining technologies of concern.
▶ 2:30:29Mr. Iacovella: Mr. o'leary the fight china act introduced requires the treasury department to regularly review whether companies on U.S. government blacklists such as commerce export controls, sanctions, dod lists, whether they should be added to this treasury cmci list, the investment blacklists to chinese surveillance firms.
▶ 2:30:54Mr. Iacovella: Can you touch on how alignment within these various government prohibitions of chinese entities eases the compliance burden for U.S. firms to determine whether or not they can invest in china?
▶ 2:31:09Mr. O'Leary: That is one of the great challenges. You don't want to go through the cost of starting an investment only to find out it will breach this law. It is almost a -- issue. You don't know the outcome until you tested.
▶ 2:31:32Mr. O'Leary: Particularly in a larger transaction where they can come to staff and say we want to invest $1 billion, will it pass or not, or do we have to test it? >> we have a provision in the bill that would allow for that guidance.
▶ 2:31:46Mr. O'Leary: That would be the very best thing to do because you can say it is very material transaction. If you are not ok with it, tell me now. Burdening it with litigation which has been a problem lately is not the answer, just yes or no, it is much easier. >> I think we have threaded that needle by not having a reverse, but Mr.
▶ 2:32:15Mr. O'Leary: Iacovella, you referred to a passive index loophole and said more than 2000 mutually traded funds have billions invested across chinese stocks and bonds. The concern is that american investors may unwittingly be financing the chinese military industrial complex. Can you explain how the fight china act would curtail that loophole?
▶ 2:32:38Mr. Iacovella: It would go a long way toward curtailing the loophole but I also think there needs to be a straight prohibition because what you will find is new york lawyers will come down here and try to create loopholes to the loophole and interfere with what it is you're trying to do which is very novel in stopping our money from funding the chinese communist party's technological and military rise as well as their funding of the surveillance state which aids and abets the internment of
▶ 2:33:09Mr. Iacovella: Uighurs. Your bill does a lot and goes a long way but needs to be much rotter because the ccp owns a skat -- stake in everything. >> thank you for holding today's hearing. Thank you to our witnesses for being here. The topic could not be more urgent.
▶ 2:33:37Mr. Iacovella: I represent ohio's 11th district homes to tens of thousands of seniors and retirees who have worked hard, saved and invested for decades. They deserve to know their hard earned savings are safe, not evaporating overnight because of a trade war or at risk from foreigntoday's threats include everything from shadowy financial schemes backed by the chinese communist party, to sophisticated online scams preying on older americans.
▶ 2:34:06Mr. Iacovella: These threats require a whole of government and whole of society response. I want to acknowledge the essential work of federal agencies like the consumer financial protection bureau, the federal trade commission, and department of justice and fbi. These agencies are on the front lines fighting fraud and financial abuse targeting older americans.
▶ 2:34:29Mr. Iacovella: The cfbp has proposed bringing big tech and non-bank platforms under federal supervision, long-overdue. Scams use these peer-to-peer apps to target seniors and they operate in a regulatory gray zone. The bureau rulemaking would help close the dangerous loopholes.
▶ 2:34:54Mr. Iacovella: The ftc has shined a light on romance frauds, tech-support cons and crypto related schemes while doj's elder justice initiative has gone after criminal networks behind them. The rise and fraud through digital tools is staggering and these platforms still fall outside traditional oversight which is why the proposals matter.
▶ 2:35:17Mr. Iacovella: Given how much elder fraud is occurring on these platforms, how urgent is it for congress to supportcfpb's efforts and close the regulatory gap and what additional safeguards should we look at to protect seniors as these tools evolve?
▶ 2:35:34Mr. Finta: You are correct, each of those agencies has a role to play in the overall process of not only preventing fraud but going after the folks that do propagate them. It is on the big things that gets lost in the shuffle to some degree, the lack of enforcement overseas were a lot of folks feel there is no consequence, they are never going to get caught and that disincentive is incredibly important in the overall plan.
▶ 2:36:04Mr. Finta: I had a conversation with an indian journalist who said, you have to arrest enough people they think they might be the next one and that has to happen for this thought process to work. In terms of the regulatory side, that is outside my area of expertise, however the regulators in this country along with enforcers and private industry have to be on the same page for this to work.
▶ 2:36:29Mr. Finta: They need to support each other because $61 billion a year leaving the country out of our elders accounts and going to foreign countries, some of which who are adversaries, is no trivial amounts. >> thank you. Instead of closing the door on scam stirs and fraudsters, republicans want to let them in by overturning the cfpb rules to regulate payment platforms. I'm glad senate democrats voted against overturning this and I will do the same next week.
▶ 2:37:00Mr. Finta: Still the scale of the threat demands more. The fbi reports americans over the age of 60 lost more than $3.4 billion to fraud in 2023, up 11% from the year before. Many cases go unreported out of fear, embarrassment or shame. These schemes are designed to be deeply personal and emotionally manipulative.
▶ 2:37:26Mr. Finta: At the same time many seniors' retirement savings are funded into ccp linked firms without their knowledge through passive investment structures. That includes companies using corporate shells designed to evade both china and U.S. investment protections and firms tied to military and surveillance industries through ccp's made in china 2025 strategy. We need to shed light on these and make sure we are not helping the chinese communist party exploit retirees.
▶ 2:37:57Mr. Finta: Increase transparency for investors and provide greater support for federal enforcement. You spoke about how many millions of americans are unknowingly exposed through chinese firms through passive index funds. How can they help investors, especially seniors, understand where retirement dollars are going?
▶ 2:38:17Mr. O'Leary: To ban the use of vies, a structure used for what I would call a faux share. These get indexed. You think you own a stock certificate, but it goes through a cayman structure. I don't know why we would let -- allow that to go into anybody's plan. This is a shadow share and yet we allow it.
▶ 2:38:46Mr. O'Leary: The other is to enforce existing laws around the golden share. If you hold a company, 100 dollars in an index fund and 10 companies, $10 and each one and one goes to zero. There are many examples of these chinese golden share companies. The value of that index is now $95.
▶ 2:39:15Mr. O'Leary: Why put it in there in the first place. We have been talking about delisting these companies and I think that might be happening soon, but sprinkled throughout our indexing and pensions and diversification's, the system we have built that is protected -- has protected seniors' investments for decades, we have let this cancer creep into it.
▶ 2:39:42Mr. O'Leary: To stop this is to enforce existing laws and add new ones. I don't want to own a v.I.e., if I am an indexed engineer. Why would I? A cayman shadow share from a company with a super preference? It is so not what they should own. We should say sorry, the answer is no, you can't put that in this index.
▶ 2:40:08Mr. O'Leary: It is simple, applying existing laws and fine tuning to remove the tumor. This is a cancerous tumor in our financial services system and we have good doctors here so chop chop, let's cut them out. >> thank you, Mr. wonderful. >> chairman mullin are. M --olinar. >> Mr. o'leary, to follow up on that discussion.
▶ 2:40:38Mr. O'Leary: The trump administration is having an ongoing review of standards to make sure foreign adversary companies are in eligible pension plan contributions. You have been talking a lot about these issues, investor safeguards, geopolitical risk, the lack of the ability to do due diligence on these.
▶ 2:41:08Mr. O'Leary: You mentioned the shadow shares and I guess when you talk about v.I.e.'s, what percent of investors are even aware of this? What percent of financial advisors or people in this business who are advising seniors would even be aware of this? I would like to ask all of you this question.
▶ 2:41:33Mr. O'Leary: >> the majority of etf's are administered by fiduciaries inside large insurance companies like fidelity or schwab. Their job is to be compliant. It is rare they ever go rogue and put anything in an index that is not permitted by law.
▶ 2:41:55Mr. O'Leary: It is just a matter of making sure we give them good definitions of what is not permitted and they will comply 99% of the time. We have safeguards, we just not have made -- we have not made them obvious enough. When you ask how many investors, if you ask an average investor what a v.I.e. Is, they would have no idea.
▶ 2:42:25Mr. O'Leary: It is not a real share. We have let chinese companies rig or take advantage of the system we provided and the lack of enforcing it to get to this extreme point. I don't know the exact amount. I will guesstimate how many chinese companies are listed on nasdaq. I would guess between $700 billion and $800 billion of market cap.
▶ 2:42:57Mr. O'Leary: They should be delisted if we enforce the laws that should be enforced. Many would say, I'm sorry I did not get it done in the past 24 months, but I will hire american counsel and get compliance. It would be a great first step because you would force transparency. I used to be in the etf business. Every firm that distributed, we had to go through a compliance process. It cost millions, but the system works.
▶ 2:43:25Mr. O'Leary: If you want to index, you have to make sure you know what you're putting in there because other people are relying on you and trusting you to do it. We have been talking about how we are eroding the system by not enforcing these laws. People when they start to look about -- learn about shadow shares in v.I.e.'s are saying, what the hell is this stuff? Why is it here?
▶ 2:43:48Mr. O'Leary: >> say I'm someone with an account at fidelity or some other, and go to my financial advisor to get advice on this. Would they even know v.I.e.'s were simply say -- >> no, they rely on their compliance departments. Some do, some advisors do, but not many. They rely on the system. You have to make sure the system. >> change the system.
▶ 2:44:17Mr. Iacovella: V.I.e.'s are in an index fund and it is the responsibility of the fiduciary to track the index fund. The ccp pressured msci and others to expand the percentage of chinese companies that go into these index funds and they will continue to do it. The v.I.e.
▶ 2:44:36Mr. Iacovella: Structure, there are no economic rights, no voting rights, no control over the board and then these companies get to list in our marketplace and one of the largest things we have not talked about. If kevin sells shares of his public company what do you have to do? You have to disclose it immediately. They don't have to do that.
▶ 2:44:57Mr. Iacovella: A foreign insider can sell all of their shares in the company from day one today two, and you will not know about it until the stock price keeps going down as information leaks out. Who gets harmed by that? >> thank you. I yield back. >> thank you chairman scott and ranking member gillibrand and chairman molinar on the house side.
▶ 2:45:24Mr. Iacovella: This is a very important hearing and I'm glad you made the time to host us today. I represent the state of arizona, with the unfortunate distinction of having the highest rate of elder fraud in the U.S. in 2022, more than 3500 arizonans were scammed out of $82 million, just the scams we know of. Many seniors never report they have been victimized. The U.S.
▶ 2:45:51Mr. Iacovella: Government organized -- identified organized crime in the people's republic of china are some of the most sophisticated perpetrators of financial fraud. The majority of pig butchering scams where they earn trust of victims and dupe them to sending increasingly larger amounts of money are perpetrated by these chinese criminal networks.
▶ 2:46:13Mr. Iacovella: They prey on fear and isolation, pose as investors are missing lucrative returns, tech support, law enforcement, romantic partners, friends and family. Thanks to the increased use of ai, which can mimic human voices, these scams are becoming more elaborate, convincing and hard to detect. The federal government needs to do more in coordination with international allies to crack down on these criminal enterprises and protect seniors.
▶ 2:46:42Mr. Iacovella: You spent decades at the fbi working on transnational organized crime. You testifies -- testified the U.S. government does not have the resources to pursue these elder fraud cases. You may have already covered this, but it is worth covering again. Give us a better description of the resources the elder justice task force needs now more than ever especially in light of law enforcement keeping pace with criminal use of ai and evolving technologies.
▶ 2:47:10Mr. Finta: I would like to clarify, that the fbi hsi, secret service, oira, cid, all have capable asians who do these investigations on a regular basis. The issue is the volume, the number.
▶ 2:47:30Mr. Finta: While you are working an 18 month, 24 month investigation, during that time there are thousands of people all being scammed and defrauded, and losing their life savings. It is not that it is beyond our capability, it is beyond the resources of a fire hose in the face of these investigations.
▶ 2:47:55Mr. Finta: If individual agents, officers and investigators are working these cases, as you work it, you gain more intelligence which means you need more subpoenas and time and analysts. It grows like a giant spider web like you see on the wall in tv.
▶ 2:48:17Mr. Finta: The issue is the aggregation of those cases essentially with the private sector to grow those cases quickly and effectively so you can do more of them to provide the disincentive. I don't think we can arrest our way out of the problem but it is a factor that could contribute to reducing it over time. >> I appreciate the point.
▶ 2:48:41Mr. Finta: These last few days have been an incredibly volatile with the stock market down more than 10%, with the change in tariff policy. It is coming back up today thank goodness, but especially for our seniors, who may be living off of retirement accounts, that volatility is scary. Fear is something scammers prey off of. As fear grows, scammers will find easier targets.
▶ 2:49:11Mr. Finta: As retirement accounts shrink, scammers will land harder blows. Can you speak to how fraudsters target american retirement accounts and how falling victim to one scam too often will make you a target for the next one?
▶ 2:49:28Mr. Iacovella: That is exactly right Mr. congressman. The public private partnership is crucial. We could tell the government how we are being attacked, who is attacking us and what different sophisticated technology they are using and methods they are using to get out their customers because it is our customers they are attacking.
▶ 2:49:55Mr. Iacovella: They get in their emails, reset rules, redirect thing so people don't even understand. It looks like to our membership it is coming from their customers. Once the customer is scams, people know about it and somebody else comes in who was probably part of the scamming and tells them, if you pay me $1000 I will help you try to recover some of the funds they just left the country, that is the first piece.
▶ 2:50:22Mr. Iacovella: It drags on for little while longer, before you know it they are out another $15,000 by the same people and do not get their money back and they have been scammed again and that is what you are talking about about follow on. >> we going to jump in? I yield back.
▶ 2:50:44Mr. Iacovella: >> I would like to thank everyone today for participating in this important discussion on threats posed by the chinese communist party on U.S. investments. Here is the take away for everyone, especially american seniors. Make sure your dollars are not invested in communist china.
▶ 2:51:03Mr. Iacovella: I look forward to working with members across the dais on this important topic and hope today's hearings resonates with americans approaching retirement to take action to ensure their hard-earned money is safe. If any members have additional questions or statements, the hearing record will be open until next wednesday at 5:00 p.m. Thank you. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap.org]