▶ 0:00:21The hearing will now come to order. First, let me welcome our colleagues from the US House Select Committee on the Chinese Communist Party. I want to thank Chairman Molinar and Ranking Member Christa Morphy for joining myself and ranking member Gillibrand for this incredibly important hearing. The US Senate Special Committee on Aging is charged with examining any and all matters pertaining to the problems and opportunities of older people.
▶ 0:00:45Our jurisdiction is purposely broad because we want we what we most impacts what most impacts aging Americans today could be radically different from what impacts the seniors of future generations. In fact, if we do our jobs here, the problems we worry about today will be solved long before any of our grandchildren have reached their senior years. It's in that spirit that we come together with our colleagues from the US House China Select Committee for a joint hearing focused on the threats that Americans face when their retirement savings are invested in communist China.
▶ 0:01:14Let's make some very something very clear about why we're here today. The government of China, Communist China, has chosen to be America's enemy. It's simple. I wish it wasn't true. Unfortunately, it is. Unfortunately, that's not a problem. That's not a problem that only our military intelligence commu community has to worry about. The government of communist China has shown again and again that it will do anything to hurt America and weaken our place in the world, including going after our citizens and targeting the retirements and harder hardearned savings of American seniors.
▶ 0:01:44I want to be clear about the threat here. If you have your retirement invested in anything that is controlled by or under the jurisdiction of the Chinese Communist Party, you are at risk of losing every dollar. And this could happen overnight. I know this may sound extreme to some, but here's what we know. There's a clear risk to American investments in communist China because the Chinese Communist Party, which does nothing but lie, cheat, and steal, controls every business in its country.
▶ 0:02:14There is no real private industry in Communist China. The CCP controls everything. Choosing to invest in Communist China threatens our national security and jeopardizes the retirement savings of hardworking Americans. During today's hearing, we will talk about the threats posed to the individual retirements of American seniors, the scams run by the CCP and the national security risks of investing in communist China.
▶ 0:02:38But as a chairman of the Senate Aging Committee, my focus is on our seniors and using today's hearing and our partnership with our colleagues in the Senate and the House to protect seniors from known bad actors like the Chinese Communist Party and make sure they know where their dollars are being invested and why they need to get the heck out of Chinese investments today. I bet many in this room have retirement accounts and investments, but not they may not even know what companies these investment dollars are being invested in. This is a huge problem.
▶ 0:03:07Too often Washington fails to fix problems not because it lacks authority to do so-c but but because of intentional or incompetent failure to enforce existing laws and rules. This is true in every part of government and it's dangerous dangerously true when it comes to holding foreign companies and governments accountable.
▶ 0:03:25In 2020, the Holding Foreign Companies Accountability Accountable Act was signed into law by President Trump which mandated that if companies in communist China did not comply with US auditing standards for three consecutive years, they must not maybe they must be delisted and banned from trading on American exchanges. This law was amended in 2022 reducing the consecutive years of non-compliance from three years to two years.
▶ 0:03:53But unfortunately under the last administration the SEC failed to enforce this law and today m many Chinese companies including Yum China, Alibaba and BU are still listed on American exchanges in clear violation of US law. This is a perfect example of why your money is not safe when investing companies tied to communist China.
▶ 0:04:13I plan on holding holding the SEC accountable to enforce the law and I hope to work with chairman Molnar, ranking member Gillibrand and ranking member Gisha Morphe to make sure laws intended to protect Americans from threats posed by communist China are fully enforced. We're also fighting to fill gaps in current law and strengthen US enforcement authority with multiple pieces of legislation that will hold communist China accountable.
▶ 0:04:36These bills will take the necessary steps to secure our 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 retirement at risk with investments in the corrupt businesses and practices of communist China. And I believe new the new chairman of the SEC will, and I know he's committed to me, that he is going to enforce this act. Stop putting Americans retirements at risk due to their involvement with prop with propping up the agenda of the CCP.
▶ 0:05:07Americans work way too hard to have their financial security destroyed by communist China. Today, we're going to learn more about this problem and come up with a policy plan to stop it before it is too late and Americans retirement stability is wiped out by communist China. I now like to recognize Chairman Mullenar for his opening statement. Thank you, Chairman Scott, and uh thank you for hosting us today. And uh I just appreciate all the colleagues from the House and the Senate uh for being part of this.
▶ 0:05:35This is a unique hearing, not only because it's by camel, but 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 point. The future of American capital markets and our national security are deeply connected. They're inseparable. For decades, the United States has led the world in innovation and investment.
▶ 0:06:02But 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 risk, it's much more than that. We've already seen the damage.
▶ 0:06:24In 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 US investments almost overnight, devastating major companies like TAL, Education, and New 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
▶ 0:06:55maintains ultimate control, no company is truly independent. And I look forward to the hearing from today from the witnesses on how the CCP control creates systemic risk for US investors regardless of industry. Mr. Olirri has pointed out something in his written testimony equally concerning the golden share the CCP holds in many Chinese companies.
▶ 0:07:20On paper, these firms may look like private enterprises, but the reality is that party influence runs deep. When 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.
▶ 0:07:41The Tik Tok bill, for example, was crafted to require full devestature of CCP control because anything less would leave the door open to the same risks. We've seen this at play time and time again. Congress has acted before to safeguard American investors through the public company accounting oversight oversight board and the holding foreign companies accountability act. But the reality is this.
▶ 0:08:10The CCP's opaque regulatory regime, its disregard for the rule of law, and its willingness to use financial tools for political gain present ongoing and significant dangers to American savings. So the question becomes this. What more can Congress do to protect US investors from companies effectively controlled by a hostile regime? That's what today is about.
▶ 0:08:37We'll hear from experts who understand how the CCP uses its influence to mask risk, suppress transparency, and undermine shareholder rights. And we'll look at what happens when American money flows into companies tied to surveillance, censorship, military buildup, even human trafficking.
▶ 0:08:57Americans deserve to know whether their capital is being used to fuel the very threats we're trying to guard against, and they trust us to take action to keep their investments safe. This hearing isn't just the end of the conversation, it's just the beginning. Thank you, Mr. Mr. Chairman, and I look forward to today's discussion. Thank you, Chairman Molinar. Now, I'd like to recognize ranking member Jill Brand for her opening statement. Thank you, Chairman. Um, it's a delight to be here. Thank you to our witnesses.
▶ 0:09:26This is a very hot topic in New York. I want to thank my Republican House members and my Democratic House members for joining us. This is so much fun. We should do this more often. I'm grateful you're here. Um, and I'm sure all of us have been hearing from our seniors quite a bit. Um this has been a very tough time for seniors. Uh the stock market's ups and downs. Uh losing over a trillion dollars of wealth over the last few weeks. It's very um anxietyprovoking for so many seniors.
▶ 0:09:56They worry about the fact that when they go to the Social Security Administration, they can't make a phone call to them. Their phone calls aren't returned. They're on hold for five hours. Multiple stories, problems with getting online access. just the list of worries go on. But the one issue that has provoked and upset and concerned my seniors the most over the many, many years that I've been on this committee is these online scams.
▶ 0:10:24The scams that are coming out of criminal networks worldwide are unbelievable, are heartbreaking, are horrific, highly complex international criminal networks are going after our seniors because they know they're soft targets. They know that they are worth trillions of dollars.
▶ 0:10:43And 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're their grandchild, they will be able to steal thousands and thousands of dollars. And the PRC, there's criminal networks in China that are so sophisticated that know this is where they can make millions and millions of dollars. And so I think this hearing is essential.
▶ 0:11:13I'm so grateful that we have bipartisan bicamel support for figuring out how can we help law enforcement crack down 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 4 billion B with a B billion with a B in scam related losses for individuals 60 and over in 2023 alone.
▶ 0:11:43So we must understand the scope of this problem. And when I've talked to my local law enforcement and asked 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 uh criminal networks. So they need resources, they need support, they need uh far more help. Um we know that these PRC organized crime networks are operating in Southeast Asia.
▶ 0:12:14They're operating in countries around the globe. Um and they are able to create massive scams. Uh one of the ones that uh Mr. Krishna Morphy and I were talking about was I didn't ever heard this term, the pig butchering scam. So they are looking at our seniors like animals that they are fattening for slaughter.
▶ 0:12:35They will scoop them into a scam, get them to trust them, get them to get 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 that we have to do something about. Um the GAO just issued a report.
▶ 0:12:55We asked for this report on uh that we 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.
▶ 0:13:16I want to thank the Republicans and Democrats from the House and Senate for being here and shining a light on this outrage that's happening in our country that we have done insufficient amounts about. We need more tools. We need more resources. We need a laser-like focus on how we can make our seniors whole. Thank you, Ranking Member Jill Bren. Now, we'd like to hear from Ranking Member Christian Morphe. Thank you, Chair Scott. Thank you, Chair Molinar.
▶ 0:13:45Thank you, Ranking Member Gillibrand for con convening us today. I'd like to address three things. First, a scamming practice called pig butchering, which Senator Gillibrand just uh referenced. Second, the impact of China backed organized crime syndicates scams on older Americans. And third, China's culpability in these scams. First, pig butcher.
▶ 0:14:09Pu pig butchering is a scam named for the way it lures victims in, fattens them up, gains their trust, and then drains their finances. In many cases, a scammer poses as a family member or friend urgently in need of money. In others, a scammer uses fake identities to get romantically involved with unsuspecting victims, such as older adults.
▶ 0:14:32Once the victim's trust is earned, the scammer asks for money or suggests investing through a fake app that drains the victim's finances. Take this story uh if you look at the video from just outside my district of a woman who lost almost $1 million to a scammer using pig butchering. Her husband passed away decades ago and recently Damas met a man online. He said he loved me. The second time I sent 35,000.
▶ 0:15:02Over time, that money sent reached nearly $1 million. Damas says the scammer told her she would get double her money back in his investments. Instead, she now owes money back to her bank, cash which she took from her home equity loan. Now, my second point, this is not just a financial issue. It's a human rights issue and a national security concern.
▶ 0:15:24According to the US Institute of Peace, cyber scamming in Southeast Asia, mainly Burma and Cambodia, is driven by Chinese gangs and generates almost 44 billion dollars annually. Weak law enforcement and corruption in this region have also allowed gangs to traffic people from 70 countries, including Americans, into this illegal scamming industry.
▶ 0:15:48As USIP has pointed out, this scamming industry is so vast and so lucrative that it now parallels fentinel 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'm 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.
▶ 0:16:18In this case though, 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. Here 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 compliment us, saying, "You're welcome.
▶ 0:16:46You give me 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 course of just 7 hours, our dear friend Daisy asked for an investment, and my staffer asked how much she needs. she responded, "Approximate investment of 10 million to $30 million. Money that Daisy would happily walk away with.
▶ 0:17:16It's dangerous scams like these that are preying on older Americans. Third, and my final point, there's more to the story than just Chinese gangs operating in the shadows. These groups, these gangs are directly tied to the Chinese Communist Party. This is Juan Quac Koi, aka Broken Tooth, a Chinese businessman, or more accurately, a mafia boss who is behind a scam compound tied to the CCP.
▶ 0:17:45Broken Tooth's public motto is, quote, "I used to fight for the triads and now I fight for the Communist Wow. Another gentleman behind another scam city seen here with a Burmese warlord is Shuh Jang. 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.
▶ 0:18:13China now seems to be taking some steps to reckon with this issue, but it's too little too late. Like the fentanel issue, the CCP turned a blind eye and has allowed this to happen. The CCP must recognize its role in allowing gang bosses and scam centers to absolutely run rampant. The financial and human cost of these scams is enormous and we must act now to protect older Americans. Thank you and I yield Thank you.
▶ 0:18:43Thank you, rank member. I'd like to welcome our witness here today. Uh before I introduce our fir first witness, I'd like to ask each of you to be mindful of our limited time together today. Keep opening statements to five minutes. First, I'd like to welcome Kevin Olirri. Mr. Olirri is also known as Mr. Wonderful. He's a business leader, investor, and known to millions of Americans for his role in the hit TV show Shark Tank. Most important to today's hearing, Mr.
▶ 0:19:07Olirri understands the risks and threats posed by Communist China and why investing your retirement there is a bad deal for any Americans. Even though he was born in Canada, I'm proud that he has now call the sunshine state his home. Mr. Larry, thank you for being here today. You may begin your Chairman Scott Molinar, ranking members Jillant and Kishna, I'm get this right. Kishna Morphy, members of the Senate Special Committee on Aging, and the House Select Committee on the Chinese Communist Party.
▶ 0:19:34Thank you for inviting me to participate in today's important hearing. I want to use my opening statement to shine a light on an issue that impacts millions of American investors, many of whom have invested their retirement funds in the equity markets. The threats posed by the Chinese Communist Party I will discuss today impact anyone and everyone like me who has tried to do business in China.
▶ 0:19:55Everyone 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 Chinese companies, anyone who invests internationally in emerging markets like China, and everyone with a 401k plan or pension invested in international index funds. I have nothing against the Chinese people. Their contributions to science and art over the millennia are well documented. It's their government I take issue with.
▶ 0:20:25In my opinion, since joining the WTO in 2000, the Chinese government has never played by its rules. This has led to the CCP to passing various laws in the realm of cyber security, espionage, intelligence, and beyond, and other mechanisms to control its corporations, industries, and business partnerships. All to the detriment of US investors. This is not a new phenomenon. It has been part of the long game. China's been playing for decades.
▶ 0:20:54Let me just elaborate briefly on a few reasons why the time for us to address this matter is today. In its desire to reduce state-run companies and their holdings in them, the Chinese government 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. It's effectively a super voting right.
▶ 0:21:22This is the so-called golden share that she is using today to control the potential sale of Tik Tok. If China maintaining control of companies wasn't bad enough for investors, China prevents foreigners from owning Chinese companies. Instead, they're cleverly exploiting the US financial system creation of variable interest entities, VI to approximate the ownership of corporate shares.
▶ 0:21:45If you own stock in a company like Tencent, Alibaba, or ICB, ICBC, you don't actually own stock in a company. You own a share of a contract of something in the Cayman Islands that is trying to approximate stock ownership. The US has given China preferential treatment for over a decade through its own special memorandum of understanding that governs accounting standards and oversight.
▶ 0:22:08This sweetheart deal with the public accounting oversight board, the PCAOB, has allowed China to continue to game the US financial system via their special treatment that is not afforded to other countries, even our allies. This is a completely unbalanced and non-rescrocal situation. And why do we allow this? How can this be viewed in any way as fair to American investors? There should be complete parody between the US and China.
▶ 0:22:37I believe Congress should act to delist CCP affiliated companies until there is a parody of treatment for Western businesses in China. If we can't own stocks in their country, they should not be allowed to own stocks in the US. Unless businesses can operate in China with the same freedoms that Chinese businesses have here, we should not let their businesses operate in the US. We should exit China's marketplace until the CCP makes significant reforms. We should demand that all Chinese companies engage in US markets complied with US accounting standards.
▶ 0:23:07For decades across multiple administrations, we have dismissed 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 as so do millions of other investors and companies. But we want reciprocal ecosystem in place that is transparent where all parties play by the rules mutually agreed upon. I want access to Chinese legal system so trade and IP grievances can be litigated and resolved.
▶ 0:23:37The Chinese enjoy these rights in the US. Why do we not have them in China? Lately, there's been a lot of rhetoric about during negotiations globally on who holds the cards quote unquote. The US is still the world's largest market, supported by the world's largest economy under the rule of democratic law. That is why so much of the world's capital is invested here. That's a lot of leverage. Let's fix this Chinese problem while we still hold the cards.
▶ 0:24:05I look forward to a robust conversation today and answering any questions you may have. Thank you. Thank you, Mr. Olirri. Now, I'd like to welcome Christopher Aavlla. He's the president and CEO of the American Securities Association. He serves as the leasing voice for financial services policy. He has worked as special counsel and policy advisor to Commissioner Scott Omalia at the US Commodity Futures Trade Commission. Uh thank you for being here and I look forward to hearing your Thank you.
▶ 0:24:34I'm grateful to the chairs, ranking members, and members of each committee for the opportunity to testify today. My name is Christopher Ikel, and I'm the president CEO of the American Security Association. Today I will discuss the risk the CCP poses to American investors and to our national security. While it was widely believed that the free flow of global capital of communist China would liberalize its political and economic systems, that's not what happened. In fact, the opposite occurred.
▶ 0:24:59Beijing used the openness of the international economic system to exert geopolitical leverage over the US and our allies. Rather than liberalize, the CCP has been engaged in a multi-deade, multifaceted political, economic, and military strategy to achieve quote the great rejuvenation of the Chinese nation. End quote. The goal is to create a new world order through economic coercion and manipulation while avoiding a hot war. This has left the world less open and more authoritarian.
▶ 0:25:29To implement this strategy, the CCP needed capital, and that's where Wall Street comes in. For over two decades, Beijing has used Wall Street to penetrate our capital markets and fund its rise. In exchange, Wall Street received huge fees and access to the Chinese market. It's this quid proquo that directly threatens America's economic and national security. The partnership works like this. First, Wall Street spins a narrative about emerging market returns and the China opportunity.
▶ 0:25:56Then, it sells Chinese companies to American investors on our exchanges. After the IPO, the money goes to China and Wall Street continues propping up these companies by putting them in stock index funds, touting them in financial media and lobbying Washington to maintain the status quo. To raise money on exchanges, companies used a novel legal scheme called the variable interest entity structure. This scheme allows a Cayman Island shell company that contracts with a mainland Chinese company to list its shares on our exchanges.
▶ 0:26:27American investors have no equity or voting rights in the shares of the Chinese company and very little legal protection. We joined the select committee and asking Congress to end this legal fiction and delist every VIE from the exchanges. After the VIE scheme was scrutinized, the CCP needed a way for Americans to buy mainland Chinese companies listed on mainland Chinese stock exchanges.
▶ 0:26:50So, Wall Street used what I call the passive index loophole, which allows these companies to be included in international, emerging market, and China specific index funds like ashares. 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 companies must comply with to sell stock to American investors.
▶ 0:27:15As a select committee found, 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. The select committee also found that numerous Chinese companies on our exchanges and index funds are on government prohibition lists. A company goes on one of these lists if it's a threat to our national security, foreign policy, or economic interests. There is no policy basis for any company on these lists to access our markets.
▶ 0:27:45And we recommend that an entity placed on one government list should be placed on all lists and automatically allow the Treasury Secretary to Dellist and de-index these companies from our public capital markets. Because China operates as a party state, this raises another important policy question. How does the CCP use American money? Unfortunately, American investor money is used to fund the emission of more greenhouse gases than every developed country combined.
▶ 0:28:12PLA weapons systems, a cyber army that relentlessly attacks us, subsidies for Chinese companies who dump their goods into our market, and sickening human rights abuses. The people of America want this to stop. But unless Congress makes the funding of the CCP illegal, it won't. The final issue I want to talk about today is fraud, which has gone from an individual criminal act to a lucrative business opportunity funded by state sponsored actors across the globe.
▶ 0:28:38And in China, Americans lost 158 billion in 2023 and are estimated to lose billions more as generative AI fraud evolves. Every day, ASA members face scams from China that target their employees, their firms, and their customers. And while millions are spent trying to stop this, Americans who've been scammed know that if they can't get their money back before it goes to China, then it's gone. The government and the private sector have an obligation to work together to stop this avalanche of fraud from continuing to harm Americans.
▶ 0:29:09To conclude, communist China doesn't play by the rules, and it's time for us to revoke the privilege we gave them to play in our game. This isn't a left-right issue or a red state, blue state issue. It's an American issue. And now we need a united Congress to take action to protect this country and our people from the CCP. Thank you. And I'm happy to take your questions. Thank you. Now, I'd like to introduce our next witness, Brady Fenta. Uh Mr.
▶ 0:29:36Finta is a retired FBI agent, the founder of the National Elder Fraud Justice Coordination Center. Through his work as an FBI agent, Mr. Fenta oversaw cases regarding international scam rings targeting older Americans. You may begin. Thanks for being here. Good afternoon. As you said, my name is Brady Finta and the founder of the National Elder Fraud Coordination Center and I'm honored to be here.
▶ 0:29:58I believe the scale of fraud against America's elders has grown to epidemic proportions and it's time that we as a country treated as such with a proportionate response. I spent 23 years as an FBI agent predominantly investigating and supervising transnational organized crime cases. And when my assignment exposed me to elder fraud, I was comfortable as the cases are essentially transnational elder uh I'm sorry, transnational organized crime under a different name. What I was not prepared for was the volume.
▶ 0:30:26Just in my limited territory of San Diego County, I was inundated with elder fraud complaints without adequate resources to fight the No one has those level of resources. Even after standing up the FBI's elder justice task force alongside the US Attorney's Office and 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 only were only able to address less than 1% of the leads.
▶ 0:30:56Based on my experience, I believe only about 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. Elder fraud and scam cases are not easy. They're incredibly timeconuming. They literally span the globe, combining organized crime groups in foreign countries with regional organizers, co-conspirators, and mules in the United States.
▶ 0:31:22Laundering the proceeds of the crime runs the gamut from cash to gift cards to wire transfers to digital For the most part, the complexity of these cases combined with their innate jurisdictional challenges and resource requirements limit their investigation and prosecution to federal entities, further straining those resources.
▶ 0:31:42In one just very typical case I oversaw, we had scammers in India working with regional organizers in the Bahamas, mules in the Dominican Republic in the United States, and Canadian and Chinese organized criminals laundering the The international natures of these scams make them extremely difficult for law enforcement and prosecutors alike to hold those criminals accountable.
▶ 0:32:03It gets more difficult when the country where the crime rate is based is While I realize this hearing is intended to focus mainly on China, I'd like to emphasize this is a larger and global issue and we currently do not have the resources to properly address it. This threat tr uh touches all of us. I'd venture to say everyone in this chamber has a story of an acquaintance, a co-orker, uh, or a family member who's been victimized.
▶ 0:32:28Both of my parents are My mother didn't want to tell me based on embarrassment and believing that there was nothing anybody could do. There is always something we can do. The FDC's estimate that the annual loss losses to the scourge are approximately 61 billion.
▶ 0:32:46And the FBI statistics that show a huge increase in these complaints over the last few years further underscore that the time is now for more dramatic response, a whole of society As a country, we've created national task forces of state, local, and federal agencies to combat illegal narcotics, gangs, child exploitation, terrorism. Our parents and grandparents deserve nothing less.
▶ 0:33:11In addition, we could make these elder justice task forces more effective by supporting them with the power, speed, and agility of the private sector. Beyond continuing education programs, information sharing, and new preventative 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.
▶ 0:33:35This is the mission of the National Fraud Coordination 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. Our founding members at AP and Amazon, Google, and Walmart are dedicated to the idea of pulling these resources together for this worthy cause. and our partnership with the National Cyber Forensics Training Alliance offers the opportunity for hundreds of other uh companies to do the same.
▶ 0:34:05I thank you for your time and attention on this important issue and I look forward to answering your All right, I want to thank each of the witnesses for being here. Now we'll go through uh start asking some questions. Let me start with um Mr. Olirri.
▶ 0:34:18So can you explain explain this idea that Chinese companies American can buy into a buy make an 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 to comply with general accepted accounting principles and our SEC has not enforced um rules get which would require any American company to comply but not for whatever for whatever reason Chinese companies don't have to and
▶ 0:34:48what's the risk to an investor? No transparency. Um, regulations in the US and the regulatory environment and the bodies that enforce it have created the most successful capital markets on earth. More than half or almost almost 60% of the world's capital is invested because of the rules put in place for transparency and appellet courts and everything that makes these capital markets work in the United States.
▶ 0:35:14And yet somehow, and I'm calling foul as a as an issuer of securities that's forced by these regulations that I abide by for obvious reasons and want to. I want to be compliant, but I also have to bear the escalating costs each year, which are millions of dollars to be compliant. And yet, I look right beside me on a listing and I see a Chinese company that is completely ignoring these regulations and suffers no outcome at all.
▶ 0:35:43It's I mean that there's no consequences and I understood the law allowed gave them 36 months for compliance and then it was adjusted down to 24 months and still they're listed and still I have to compete with them to raise capital and they don't even have to pay the compliance cost. I mean what's wrong with this picture? How can this possibly be going on? And I'm ab above I'm so excited that finally this is getting national focus.
▶ 0:36:12This is absolutely outrageous and unfair. And we're letting them take this capital they raise in these markets that we can't do the same thing there. We can't litigate there. We can't protect our IP there. They use the courts, the American court system to litigate my companies after they steal the IP and knock the product off. And I can't do anything about it except come here and say, "Wake up." Like, this has got to stop. It's got to stop. And they have to pay the consequences.
▶ 0:36:43There has to be consequences. I would be in a federal jail doing what they do in terms of not being transparent on their quarterly statements. There's no way this can go on. So the the Securities Exchange Commission requires a company that wants to be sell stock to the public to provide disclosure of anything that's material. On top of that, they require them to give audited financial statements. Right. And that's what you have to do.
▶ 0:37:13And I also have to disclose if I have a super preference share. It has to be disclosed. That one individual controls the entire outcome of the board in the company. Who would want to invest in a company like that? Do you think I could raise any money if I disclose that? Is I have a golden share in my structure that only I can decide all outcomes on every single issue. The board is irrelevant. that's basically what that share is. Could I even compete?
▶ 0:37:37And I bet you there are hundreds of companies that have not disclosed that listed in America today on the NASDAQ and the NYSC. Why are they trading? I can't do that. How come they can? They got to be Listen, if you think that's okay and you want to invest in a company where there one individual has a super golden share, go ahead.
▶ 0:38:00the chances you go to zero are very high because that person may not have any governance or any momentum or any consideration of the rest of the shareholders. That's why we don't allow this here and that's why we're 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 and it's just got to stop.
▶ 0:38:28So, number one, they're not complying with SEC rules. Number two, they're not complying with exchange rules. And number three, anybody that's taken them public, all right, they can't comply because they can't disclose anything material because there's not enough information, right? 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's why we have competitive markets. I know what the rules are.
▶ 0:38:58If I want to do a listing, I want to raise capital, I want to do an RTO, whatever it is, I know what the rules are and I cannot be non-compliant. Yet, I'm competing with companies that go after that same dollar from the investor that are totally That's just wrong. And I'm happy to come here and scream about it. Happy to do that. I'm happy that we're having this Thank you, Mr. Larry.
▶ 0:39:26And now I'll turn it over to uh the chairman Molinari. Thank you, Mr. Chairman. Uh Mr. Olirri, if I could follow up with you on some things. Uh you know, we're here to explore today the risky business of investing in Chinese companies. And it's an area where you have some experience as a potential purchaser of Tik Tok. And uh Tik Tok, as you know, is one of the most prominent Chinese companies on the planet.
▶ 0:39:52And when you were putting together your tick- tock bid, what sorts of national security and legal risks were you most concerned about? And how did those risks affect the bid that you The truth about Tik Tok is, and I'm aware of this, and many others in the social media industry and the software and AI industries know this, Tik Tok is weaponsgrade spyw wear. Period.
▶ 0:40:20It's one of the best propaganda machines I have ever seen. And if you want evidence of it, go on in the last 24 hours and look at the videos generated there through AI of overweight Americans at sewing machines. Even the president himself depicted here or over iPhones screwing in screws with the message, let's make America great again. I have never seen such blatant propaganda. And that's why in this situation, this law was written.
▶ 0:40:49And it's very specific and this is before the Supreme Court 9 to0 ruling about redefining what these laws said regarding the algorithm. What it says is we cannot any interested syndicate that wants to buy this cannot use the algorithm. That's 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 to0 very definitive no algorithm.
▶ 0:41:19Now many syndicates have been formed with the idea of leasing the code, leasing the algorithm, buying the algorithm, fixing it, putting it on an American server. What everybody was looking for in the capital markets was a definition of whether this was even possible. Would you write an adminification? Would you put that indemnification in the reconciliation act and attempt to get 51 votes? Would you go back to Congress to change the law and get 60 votes to allow an indemnification for the buyer to survive into the next administration?
▶ 0:41:49Because the penalty is $5,000 per 24 hours per account. That's 80 plus billion dollar a quarter. Nobody's going to do that unless they're indemnified. And I've understood today from Senator Cotton that's off the table. Now we have clarity. Whoever is going to buy Tik Tok is not going to buy the algorithm. Period. That's clear. And I think that's great that you've done that because it makes the competition much much more in focus.
▶ 0:42:19And do I want Tik Tok to survive? Yes. I'm an advocate, as you know, for small business in America. Companies between 5 and 500 employees. Very successful platform. Over 7 million families make their living on Tik Tok. It's the lowest customer acquisition cost vehicle in America. It's great competitive product when it's used properly. I'd love to be part of the syndicate that buys it. There's no question about it. But I'm also an advocate for these small businesses because they create 62% of jobs in America. They are the American economy. I'd like to see this product survive.
▶ 0:42:49Happy to play by the rules 100%. Can I can I just follow up with you? You talked about the golden share and I'd like to hear a little bit more about that. And relative to Tik Tok, does Xi Jinping have a golden share in Bite Ask yourself why when we're talking about buying Tik Tok, we're not talking about the shareholders of the company that own it called Bite Dance.
▶ 0:43:18They seem to be irrelevant in this negotiation. There is only one narrative that matters. Every buyer knows this. What is Trump, President Trump going to do with Chi on Tik Tok? 100% he has a golden share. There's no other way this deal is getting done. And I think that's the case for hundreds of companies that have raised capital in the American markets. He will personally decide. You may not like that. I certainly don't.
▶ 0:43:48But I respect it to be a fact. And I know I can't do this deal or anybody can without his decision on what the structure is going to be. And the laws currently here allow for the Chinese to own up to 19.9% of this is a media company. These laws are already in place. I'm happy to work with this deal as as every syndicate would be as long as it's compliant. But does does Chi have a golden share? 100%.
▶ 0:44:19He alone will decide. Thank you very much. And uh with that, I'd like to call on Senator Gillibrand. Thank you very much, Mr. Chairman. Appreciate you very much. Um for Mr. during your career as an FBI agent, you worked on a case that uncovered a multinational organized fraud ring that targeted elderly victims in the United States.
▶ 0:44:47Your testimony notes that 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 per perpetrated by these international criminal networks? I appreciate the question, Senator.
▶ 0:45:13When I said before there is something we can do, I genuinely and truly believe that we have amazing power here in the United States and opportunity not just within law enforcement in our government but in our private sector. Um truly even during those transnational organized crime cases and pretty much every single one of them involved criminal enterprises overseas with co-conspirators in the United States our private sector holds the data that we need for that evidence for the investigation for the
▶ 0:45:45Now of course it's available by subpoena. It's available by a lot of hard work and a lot of agents coming together over sometimes years to work these cases which essentially defeats us from getting a lot of progress against a threat like that. Not enough cases, not enough agents.
▶ 0:46:02Now, if if we got to the point where we have in in other instances, for example, our JTFs, 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.
▶ 0:46:26The culmination of this across the country if we had more of these task would inform those decisions that we're trying to make overseas, right? We we would have the intelligence we need with with more of those cases, with more of those arrests, with more of that intelligence. It's definitely within our grasp. So, you're saying you need more personnel and more investigative Is that what you're saying? Yes, ma'am.
▶ 0:46:51similar to again uh IAK the intern the crimes against children task forces which are predominantly staffed with local police departments where we where those local and state resources can be used to support larger federal and international investigations. The effect of that is is much greater than the individual investigations in local territories. there. You're saying you want to deput deputize local law enforcement to help. Absolutely.
▶ 0:47:21If there was an EJTF, an elder justice task force, a what? What? Say it again. I'm sorry. An EJTF, elder justice task In every major city uh in the United that allows you to deputize local law I will work on that with you. Um what about tech? Do you have the appropriate technology? A lot of these scammers rely on uh voice recognition systems.
▶ 0:47:45They um do deep fakes for voice, deep fakes for photographs, deep fakes for bank accounts, a letter from your bank saying, "Oh, you need to update your password." I mean, they're very sophisticated. Do you have the tech you need? Do you need a technology support? And again, um I'll remind the chamber that I'm retired from the FBI. And the FBI does grow and change every single day, but it is it is the government.
▶ 0:48:08Um, that's why I think it's it's so important for that relationship and partnership with the private sector to bring cutting edge current tech from those companies in on this fight. And I think it's uh it's a good option that that would reploms together.
▶ 0:48:33stacking that sort of evidence and intelligence um would create an avalanche of positive cases and Um Mr. um Illa uh what steps should Congress take to address continue investments by PRC 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?
▶ 0:49:05I think Congress uh should take steps to to ban PRC investments. I think that the the fiduciary duty that's owed to the beneficiaries is very difficult to comply with because diligence in that country is non-existent 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 assert a state secret or a national security privilege when you try to do an audit. So that's why I think they should be Thank you.
▶ 0:49:35Thank you, Mr. Chairman. Thank you, Ranking Member Gillibrand. Ranky member Krishna Morphy. Thank you, Mr. Chair. Let's first take a look at some of these scam factories in Southeast Asia. Many of them are in Burma along the border with China. Mr. Finta, the FBI understands from Thai intelligence that these centers are a haven for Chinese mafia engage in fraud and criminal acts, right? Yes, I believe that is true.
▶ 0:50:03And the CCP could work with local authorities in Burma to shut them down. But for years, CCP in action allowed the syndicates to flourish. Right. And as long as these centers, these scam factories continue to operate, these scammers will continue to target older Americans. Right. No doubt. Let me turn to my next topic.
▶ 0:50:25It may not come as a big surprise, but the pictures that elderly Americans are getting scam texted every day are not actually of 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. F Mr.
▶ 0:50:49Finta, as you can see behind me, you can buy packages of hundreds of these photos for just 80 yu, which is about $11, right, on the Chinese internet. Yes, sir. 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.
▶ 0:51:18Finta websites like websites like these where scammers sell photos of unsuspecting young women are Chinese websites, right? I believe that is true, sir. 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 And the CCP could with a flip of a switch take these down, right? I don't know the I don't know the technical side behind that, sir, but I I I think they have great capacity to impact that.
▶ 0:51:48So, the CCP could stop this, but they are not. And through their inaction, they're complicit in the bankruptcy of countless older Americans. Right. I don't disagree with that, sir. Now, I'd like to turn to my last topic. So, I want to turn your attention to a surprise guest witness, Daisy, who I mentioned in the opening. I had the chance to actually v video chat with her yesterday and she even gave me a compliment. Can you play the video? Yes.
▶ 0:52:18Can you see me now? Hi, Daisy. How are you doing? Well, it's nice to talk to you. As you can see, Daisy is pretty convincing and engaging, likely enabled by AI, live face filters, or deep fakes. The conversation quickly switched to investment. I had a question for her.
▶ 0:52:44I said, "How much do you want me to invest in gold?" Start with a smaller money, right? You can start with $100 or $500, but it's up to you. You know what? This is how people in scam compounds prey on older adults. The scammers start small and gain the victim's trust, then butcher them for their life savings.
▶ 0:53:09I then asked plainly, "Is anyone making you do this?" Her response was not Ask you to do it and no one asked me to do it. I just tried to do it by myself to make a profit by myself. You got it? We then gave up the jig and I I asked her if this was a scam, but it did not end well. Is it a scam compound? Your mom is a scammer.
▶ 0:53:39They can help you there. They can help. Not happy. What's really unfortunate is that this person pretending to be Daisy could very well have been trafficked or kidnapped and forced to work at a scam compound with CCP connections. Mr. Finta, just like we need to protect older Americans from these scams, it seems like we also need to stop the human trafficking that enables these scams. Right. I couldn't agree more.
▶ 0:54:05Um and and honestly, if we worked if we worked together as a country and we put all those resources one basket, we'd have a lot more effect at making that happen. Right. It's like we we got to protect our folks, our our seniors, but at the same time, if we could stop the flow of this human trafficking, the the people who are working at these scam factories, we would also be uh effectively shutting down the scams.
▶ 0:54:29So, I call on our committees to jointly work on these two issues together and for all Americans to be vigilant of these scams as well. Thank you, and I yield back. Thank you. Uh, chair recognizes Representative Le Hood. Well, thank you, uh, Mr. Chairman, and I want to thank my Senate colleagues for welcoming us. I actually just came over here because I wanted to try the US Senate water. So, uh, we we appreciate you having us here as House members.
▶ 0:54:57Um, thanks to our witnesses for uh, your testimony here today on this very important topic. Um I I'll just state at the outset here. America's global innovation leadership matters and Chinese leaders uh recognize that foreign know-how and capital are fundamental to their malign activities to unfairly bolster China's own domestic technological innovation including AI, robotics, quantum and semiconductors. We've talked a lot in this committee, the select committee on China.
▶ 0:55:27China has a plan to replace the United States and they're working at it every single day. They want to beat us technologically, militarily, economically, um, and diplomatically. And the sooner we wake up to that, the better. And, um, as we think, unlike our democracy, the CCP can dictate and arbitrarily direct industrial policy, uh, as it relates to funding towards technologies they believe are most important.
▶ 0:55:54Uh we've seen that with CCP um subsidies and investment in research rising six times faster than the United States. The CCP plays by a different set of rules and standards than the rest of the world and has a track record of exploiting US investments and intellectual property. We've heard a lot about that on our committee in our committee hearings to develop Chinese domestic military and intelligence capabilities that undermine US national security.
▶ 0:56:23New restrictions on access to US capital and expertise could hinder the CCP's ability to innovate new technology. And we have a number of bills in the House right now that we're looking at. The US must continue to create new tools to curb US investment in CCP high-tech sectors and prevent US capital from being used to embolden the CCP's military. Um, I'll start with you, Mr. Olirri.
▶ 0:56:49Uh we've heard from a couple of the w a couple of our um members today on on the uh CCP's use of golden shares as a vehicle, but um it also seems to be a vehicle for party control inside private companies. From your vantage point, um are there any private companies in China that have the ability to refuse a request from the CCP over business decisions under this I'm sure they have the right to do that.
▶ 0:57:18and then you don't hear from them anymore. That's what I think happens. It's sort of a Jack Ma situation. I mean, you got to tow the party line. I think those are the rules. That's how it works. Um, he was an extraordinarily successful entrepreneur and then he disappeared for a while. And I think that's how it works. I think if you refuse uh to cooperate with the golden share participation, remember they're selling down to 1% with effective super rights with that 1%.
▶ 0:57:48And you know, I'm not sure you can go to your council in China and say, "Look, I'd like to object for this and litigate this in court." In fact, I'm sure you can't do that. That's what you would do here. If the government said to me, you you're going to sell, you know, we're going to sell our complete holdings and we're going to keep 1%. And uh we're going to tell you what to do every day in one of my public companies, I'd say, sure, let's go to let's go to court.
▶ 0:58:13That's why people invest here because there is an appellet system on a check and balance of crazy ideas like that. So I my answer would be there's no difference in China between a public company or a private one. There's just a golden share. That's it. Thank you for that. Um Mr.
▶ 0:58:32Uh Ivan Kova, as I mentioned, while the United States still funds most basic research, more basic research than China does, China investment is rising six times faster and is expected to overtake the US in spending within the decade. How can we as policy makers support the development and fostering of innovation and bolster America's leadership position in the in in this international competition?
▶ 0:58:54Well, I think the one of the first things we can do is prohibit American money from continuing to fund Chinese companies and their innovation and their military rise. I think that's that's what my big concern is and why I tried to articulate in the testimony is that we have companies on the commerce list, on the DoD list, on the human rights list. These companies should not have access to our capital markets. They should not have access to anybody to be able to do business in this country.
▶ 0:59:22But for some reason, they continue to be able to take American investor money and fund their rise. And it's like a whack-a-ole scene where we put one on uh an index list, they create a subsidiary, and then that subsidiary starts to get money in our capital markets. And that's why whatever Congress does, it has to be very crystal clear on the prohibition. Thank you for that. Uh I yield back, Uh thank you. Um thanks for being here today. Uh, I'm John Houston.
▶ 0:59:52I'm Senator from Ohio. And, uh, I want to, uh, talk a little bit about AI. And I know that Senator Rosen and I have a a bill that would prohibit uh, DeepSeek from being on any federal federal uh, devices. But I have um you know grown concern about how you know we talk about the scams with seniors and certainly uh foreign adversaries like China are exploiting our freedoms.
▶ 1:00:22We we we allow these technologies to freely flow inside of America while they prohibit those same kinds of technologies from being available to to their population. And I'll just I know you have a lot of experience in in looking at these investments in China and abroad. Uh do you have any thoughts on AI particularly deepseek or anything in that space?
▶ 1:00:50how our freedoms, how they're how Chinese government and and Chinese businesses are perhaps exploiting our freedoms and what threats AI pose in that space particularly for seniors and and scams that could be perpetrated in America. Yeah, this is a good point.
▶ 1:01:10you know, the um this issue around AI competition, it's my belief that the country that advances AI the fastest and the most capacity um is the safest from a defense point of view. I don't care where warfare goes in terms of technology, it's going to be driven by AI, predictive outcomes in a in a war scenario. Um, if I were China, I I would want to be the most advanced and as fast as I could in AI just to prepare for warfare in the future.
▶ 1:01:40I mean, that's what we should be really concerning ourselves with. Do we have the most advanced AI? Um, you can see the effects of AI. We talked about fraud. You can see the propaganda as of 48 hours on TikTok right now. Incredibly, remarkably generated images of of overweight Americans at sewing machines. That's all AIdriven.
▶ 1:01:59The challenge we have um and I'm it's it's almost worth its own investigation is the country with the most power wins AI because you have to build gigasized data centers right now in America. We have a demand for 45 gigs. Five gigs are under construction. What holds us back in North America, Mexico and Canada included, is permits and power.
▶ 1:02:24If you go to any authority here in any state and ask for a gig of power, you can't get it. It's just not available. So, our our grid is is is maxed out. And China has uh solved this problem with coal powered electrical plants that are generating a tremendous amount of electricity. They don't have a problem with permitting. Um the government finds the land, they they build the facilities and they power it with over 1.4 gig of power.
▶ 1:02:52And uh one of the reasons they were able to advance deepseek so quickly was they got the power to do it. And I I you've heard lots of warnings about this, but AI it should be earmarked as number one issue for defense. That's what I think it is in every way, including propaganda and everything else. But if we don't have the best AI, we won't be winning militarily in the Well, that's I think that's a a really good point.
▶ 1:03:19And if you study the history of the world, the nations that are the most military and economically dominant are the nations that are the most innovative. And new technologies from the beginning of time have advanced as military weapons that allowed for nations to conquer or be conquered.
▶ 1:03:37uh it certainly creates that same opportunity from an economic point of view because look militaries are built through uh the revenue and the growth of a country of a nation's economy and the tech and the tech and and the tech is financed from that economic dominance. So economic dominance gets military dominance.
▶ 1:03:57military dominance uh traditionally has been helpful at at uh uh economic dominance and conquest and setting the rules of the game for uh global competition. Uh other two gentlemen who are with us today, you have any thoughts on that those particular issues? Yeah, I think I we could go back to exactly what Kevin was talking about in the beginning and what I've tried to talk about, which is the the playing field is not equal.
▶ 1:04:27Our companies are playing on an unlevel playing field to access the capital over there. It it's going into China and it's it may never come back. She makes one decision and then then that's all gone. And we don't know how deep and how far the investment ecosystem is in private equity, in pensions, it's in mutual funds. Any of these that hold Chinese companies can go to zero tomorrow if Xi decides to do so.
▶ 1:04:58And I think that's what the scariest thing is from my perspective. Great. I'm I'm out of time, but I 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 particular case our elderly citizens in this nation and we got to wake up to it and I appreciate your thoughts.
▶ 1:05:28Uh, chair recognizes Representative Caster. Thank you, Mr. Chairman. Thank you to the witnesses for being here. And I want to apologize if I've been kind of squirming in my seat. I'm I'm just like our neighbors and small businesses across America are suffering whiplash right now because of the economic chaos that has been inflicted upon us uh by the White House and the president over the past few weeks regarding uh import taxes and just the the sheer chaos
▶ 1:05:58of not knowing what is coming next. And to the subject of this hearing, that kind of chaos empowers the Chinese Communist Party. uh that that emboldens them to continue their malign economic abuse of our seniors in this country, but our um our allies, our friends, um the Chinese Communist Party,
▶ 1:06:29they know that these fraudsters and sophisticated scammers uh target older Americans to steal their hard-earned cash. um is especially poignant in a state like Florida where 20% of the population over 65. In the the latest report to Congress regarding the protection of older older adults, the Federal Trade Commission stated that older adults reported losing more than $1.9 billion dollars to fraud in 2023.
▶ 1:07:00That's just the cost of the reported cases. The vast majority of frauds are not even reported. I heard you, Mr. Fent, to talk about uh your your mother, your parents. I I hear these same stories from my mother and her uh friends. Um they just feel like they're over the barrel, that they are being prayed upon. They're not exactly sure what what's coming at them next. They want help.
▶ 1:07:26The problem is that that the White House now not just causing this economic turmoil and uncertainty, they're also going after the cops on the beat. uh particularly the Department of Justice and the Federal Trade Commission. The Federal Trade Commission is our one of our premier consumer protection agencies. It has a critical role in fighting fraud. Um and it gets more complex all the time.
▶ 1:07:54So to divert resources from a federal trade commission that has grown expertise over time to tackle these kind of abuses, it just doesn't make any sense. So, here's a glaring flashing warning light right now. Not just the economic turmoil caused by the president, uh, but what what he is doing and the fact that Republicans in Congress are not standing up to keep the cops on the beat at the Federal Trade Commission.
▶ 1:08:24We're talking about their investigators, their enforcers, and the president even went so far as to attempt to fire uh commissioners from the just the Democratic commissioners at the of the FTC. Now, here's the problem. Congress in a bipartisan way a few years ago established the FTC as an independent bipartisan bipartisan enforcement agency. They have a long history of defending consumers.
▶ 1:08:51So when you take the cops off the beat and then you say, "Well, the FTC, we don't even want you to operate, then you're just hamstringing our own our own cells, our ability to counter the CCP in all of their malign efforts." So Mr. Fenta, you in your testimony uh you said and and your exchange with Senator Gillibrand, you said we need to double down. We need to recommmit uh through the Department of Justice.
▶ 1:09:20And wouldn't that include the Federal Trade Commission too where we have uh experts on that are ready to go on task and work to counter uh the Chinese Communist Party and the fraudsters? I appreciate the question and I think the Federal Trade Commission would be an essential partner in this whole of society approach this task force.
▶ 1:09:41I will say that historically with each agency regardless of cutbacks and changes in different administrations working we continue to lose. The problem keeps getting worse year after year after year.
▶ 1:09:55I think probably the bigger issue is establishing a working relationship that includes the FTC, the other law enforcement agencies in the United States, and the private sector to share the appropriate amount of data to have effect, which hasn't really been the case at at an effective or impactful level in the past. I agree with you and I I salute you. Thank you to our witnesses for being here and helping us to call out uh these scammers, these these fraudsters.
▶ 1:10:25We h all have to recommit uh and definitely not take the the cops off the beat and create economic turmoil that pushes people into the arms of the Chinese Communist Party. I I yield back. Thank you. Um and I know it's probably a little bit confusing with folks running to vote and get back get getting back here to hearing and also uh who's chairing the committee. So, I am proudly taking over chairing the committee. I am Senator Ashley Moody from the Tampa Bay area in Florida.
▶ 1:10:54Like my uh House colleague uh who also represents the Tampa Bay area. Um it's really great to have you here. I was an attorney general for a long time in Florida. And one of the things that I worked hard against were the scams that were affecting our senior citizens. It was one of my top priorities. uh there is no doubt that these some of these are emanating from uh China.
▶ 1:11:18What I think has leaders from both parties struggle with just like the American public struggles with is understanding exactly how China and the Chinese government is operating to undermine American interests and I believe American strength and security.
▶ 1:11:39In fact, I just uh launched a bill and sponsored a bill, 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 here on visas that were sneaking onto our military bases, taking pictures.
▶ 1:12:03Um it has just be it's happened in the state of Florida and it should be no surprise if anybody was following it that China passed laws uh just before the Biden administration. The first one was all Chinese nationals had to cooperate with uh matters of national security and if you were a Chinese national you had to participate with intelligence gathering or face consequences. So why we are issuing visas to Chinese nationals that are coming over here makes no sense.
▶ 1:12:33We 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've been fascinated with and and appreciate is your testimony and your experience in identifying ways that China is acting that is undermining America's interest. This is why I'm so grateful for President Trump and putting America first. And part of that lies in and m Mr.
▶ 1:13:02Liry Olri I should say you are always saying people think that they are investing in Chinese companies and in fact they are investing in ways that may be undermining our own interests or undermining their own interests. I know you've had experience with that. You've been gracious enough to give t time and talk to other senators about that.
▶ 1:13:21Um and and again we've discovered things over time and I'll go back to um we we we caught them setting up police stations in our own country right where we caught them stealing intellectual property from our universities and setting up institutes within our universities. I mean there are ways that we have tried to um reveal these these very directed specific targeting of undermining American interests. And so I'll turn my first question um to Mr.
▶ 1:13:50Liry uh you have 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 um cannot be trusted as long as um we're willing to tolerate the totalitarian regime in Beijing?
▶ 1:14:16Well, step one, which I think is going to be the easiest path of uh least resistance, is to simply enforce existing laws, uh particularly in capital markets where those of us that uh are compliant have to compete with entities that are not. And so, uh if you have a golden share or if you haven't uh produ produced GAP statements that are transparent over the last 24 months, you're going you're going to get delisted and that's going to be billions of dollars getting evaporated off our exchanges.
▶ 1:14:45And that I think is a wake-up call to China, which really, if you think about it, wants to become the eighth member of the G7, so the G8. They want to play with the big boys. They're going to have to play by the rules. Everything stems from capital. You You can't build an economy all on your own. You have to get access to capital.
▶ 1:15:05And we have provided an amazing platform for China to tap into the world's greatest economy from a consumer basis where they can sell their products and also uh the rule of law to raise capital and that has not been fair. It's not been a level playing field. Just to be sure, I actually want to invest in China and I want to compete in China and I want to be able to sell products to Chinese consumers. I've got nothing against Chinese consumers.
▶ 1:15:34I I I feel that American technology and innovation can compete anywhere and I just want to compete on a level playing field. We need to impose a level playing field and the only way to do that after watching for 20 years and multiple administrations, not only here domestically but internationally, nobody has called them to the rug.
▶ 1:16:00Nobody has said, "Okay, you're not And all they've been taught from us is there's no consequence. You can do whatever the hell you want and you don't pay the price. That is what our message has been for 25 years. And I'm only asking as one voice, when is this going to change? I mean, when?
▶ 1:16:25Because if it doesn't change now, they're going to continue to take advantage of us in every way possible, including IP theft, which I bet you, and this is a personal opinion, you give me any Chinese technology that's advanced, and you reverse engineer it, I'll show you American code from some decade as many 40 years ago. I swear to you, I believe that. And we never did anything about it then, and we're not doing anything about it now. We're here to say it's got to stop.
▶ 1:16:54But we're the guys in the front line. We're we're dealing with this. You've heard my colleagues talk about this. It's just not fair. And I'm just asking for you to impose the existing laws. If you do that, believe me, those boys are coming over here on an airplane. That's what's going to happen. You can't cut off people from the United States market, the largest on Earth and capital markets, without a consequence.
▶ 1:17:16Well, we appreciate you certainly being here and being a part of this process where we are um calling calling it out and uh conducting a Senate hearing, a joint house and Senate hearing is certainly part of that.
▶ 1:17:29And I want to commend our chairman of this committee, Senator Rick Scott, who has really used this committee to tackle some of our most challenging issues, not only confronting the threats from China, uh, from the opioid crisis to, um, how do we, um, confront the most pressing issues facing our seniors. I want to thank you, chairman, and I also want to thank you for coming back so that I can pass the gavl right back to you. Appreciate it, Mr. Ori. Thank you, Senator Mood. Yeah, we've got a lot of votes this afternoon, so I have to go back and forth for votes.
▶ 1:17:59Senator Yeah, thank you, Chairman. Mr. Finte, I wanted to start with you. As I was preparing for this hearing, you know, I was trying to get a sense of just the magnitude of the problem that we face. And I think every single one of us realizes that, you know, we don't know the full extent and scope of of what we're dealing with. And I thought in fact, your testimony, I thought, approach this with a sense of humility. You said I I believe only 10 to 15% of elder fraud victims ever report the crimes against them.
▶ 1:18:27I I guess I just wanted to start based off of your experience. Are there any best practices that you you have seen or there certain types of steps that we should be taking to make it easier for the reporting or try to have a better handle uh try to better encourage people to come forward but also you know making sure that we know what we're actually dealing with. Absolutely. Uh, and thank you for that question.
▶ 1:18:51It's a it's a it's a great opportunity to talk about what should be as opposed to what is right now. And unfortunately, right now in the United States, the the reporting is remarkably low. One of the other kind of consequences of the the crime itself is that a lot of our seniors would prefer to report to their local police departments.
▶ 1:19:19But when you walk into a police department in the United States right now and you say, "Hey, my mom or my dad or myself was was the victim of a a popup ad on the internet where I went to a digital currency ATM and sent money Unfortunately, the vast majority of the time, what you're going to immediately get is, "Hey, I'm sorry. There's nothing we can do." Yeah. you should call the FBI or you should, you know, file a claim with IC3.
▶ 1:19:49When you call the FBI as an individual or HSI or you you file a claim with the Crime Complaint Center, you you're viewed essentially as an individual who lost $30,000 could be your life savings. Unfortunately, there's hundreds of thousands of those complaints.
▶ 1:20:10and without a real combined effort to aggregate really analyze and work the most pressing complaints again with our private industry partners. We're pushing a giant rock uphill as law enforce as law enforcement and it does not encourage people to do those reports when they don't see the effects of them. Right? Right.
▶ 1:20:36When you file a complaint and that complaint does not get worked, you're not called to testify at a sentencing hearing. You don't get that. Well, you know, even I mean, you said here in a follow-up sentence, even with this low percentage, the volume complaints is still far too large to investigate under current circumstances as you were say. I I guess I wanted to just ask um are we thinking about it in the right model here?
▶ 1:21:00like you know I want I was about to ask you like how much more do we have to surge resources towards this but you know this is kind of like a sysophian effort though in terms of just you know constantly feeling like we're never actually going to scratch uh what is actually there uh I guess I wanted to ask you you know in terms of what you experienced are we successful in addressing some of the complaints that we had or is that just not the right direction in terms of being able to put our resources towards No and I and I believe with any
▶ 1:21:30large problem. There has to be multiple approaches to to to combat it. This is just one of them in terms of actual investigation and enforcement. I do believe that um if we constructed because I did have great success at least 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.
▶ 1:21:56it is effective as a model if you proliferate that across the country. So the combined results of 50 100 EJFs around the country would start to have a disincentive effect on those groups overseas and the people here facilitating those crimes. I see.
▶ 1:22:19So you're saying if if you can replicate that type of of and have it scaled across our country, but still would need to be some type of coordinating body. Is that something that you see be able to rest within the FBI or is that something at federal government level to try to coordinate across?
▶ 1:22:41Well, that's a good question and and uh that's that's outside of my my lane in terms of speaking for other agencies, but I do think um again with uh for example, National Elder Fraud Coordination Center to aggregate the data from US companies who do have amazing resources to support those types of investigations would be a Yeah. Okay. Thank you. I'm out of time, so I'll yield back to the chair.
▶ 1:23:10Thank you, Senator Kim, Senator Justice. Well, first of all, thank you for all three of you coming and and your testimony. I didn't get the chance to hear it and so, you know, we've been running back and forth doing all these votes and everything, but I've got to I've got to just tell you just this. You know, for one of you, Kevin, we've become real friends. And what an incredible man this man is.
▶ 1:23:39You know, I've had him in my office in in Charleston, West Virginia, and the governor's office and and I had the opportunity to be the governor of the state of West Virginia for eight years. And I can tell you that I I can speak very frankly and say I don't know that anybody's been in that office that's been more credible than this man. And so I appreciate our friendship.
▶ 1:24:03He's done every single thing that he said he would do, even to the point in time when he called West Virginia a winner state. And I would say just this, if West Virginia is a winner state, you know, I love I love the contest of ball games and everything, but absolutely we can't possibly say we're winning. We're absolutely winning when it comes to China.
▶ 1:24:30I don't see how anybody can say that and say that in a fair fair way. Now, I can honestly say just this too. One of his companies, Prime Six, and I hope I'm not I'm not stepping out of my bounds and everything, but he came and and in November of last year, we were sitting, you know, in a location in Fairmont, West Virginia, and he said, "We're going to make this a go.
▶ 1:24:55We're going to make it a go now." And I think they're scheduled for June, from November to June. And absolutely, they're pulling it off. And so, like I said, as far as credibility, he has he is not only my vote, but many, many, many in this great in the great state of West Virginia.
▶ 1:25:16So with all that being said, you know, Kevin, as your friend, I would just ask just this because we've got a lot of elderly people in West Virginia and those retirees are absolutely being bombarded in a lot of ways. You know, I have I thank you for bringing awareness, all three of you, awareness to a real problem in this great country that we know about, but we don't seem to do anything about it.
▶ 1:25:46You know, Kevin just a minute ago said just that. We know about it. For God's sakes a living, this can't be that hard. You know, we know about it and and we don't do anything about it. Well, I really don't get it. You know, like I said, 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.
▶ 1:26:11And so, so I I've got just one question and and it's just an echo of the same question, but it just basically says this. 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.
▶ 1:26:39What can individuals in West Virginia, the residents of our great state, do to help protect themselves and their retirements and their pensions and their from these financial threats? And so, please, Kevin, if you would, and you've probably already given us a whole bunch of advice already, but I didn't have the the liberty to be able to be here to hear it, but please tell us more wisdom.
▶ 1:27:06Well, I I just feel that if the initiative uh and the incentive uh from these hearings and with with other members is to enforce existing laws as they stand, uh we will end up in a much better place uh in in terms of our relationship with China because they are a large economy. We are larger and there's a chance to work all this out. I might add that um in while we've been sitting here, my phone's been lighting up.
▶ 1:27:32The market's up 3,000 points because what's occurring here is 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 may maybe we end up with zero tariffs. I don't know. China is not the same. It's not the same. We have to resolve the issues we have been talking about here today as part of the negotiation. I don't care if we get to 400% tariffs on China.
▶ 1:28:01The only thing I care about is getting them to the table to resolve these issues, to make it safe for every American to invest there or do business with them, including in West Virginia. And you know, it it's this this is changing by the hour. But now I'm starting to see what's happening and so is the market, too. The world is one thing. China is completely different. Tariffs are being used to get them to the table to level the playing field finally.
▶ 1:28:30and all of us that are involved in dealing with this and competing with it applaud it. I can assure you I'm I I'm I'm the voice of millions on this that have been doing business there. And something else West Virginia can do that I think is going to be coming into the highlight pretty soon as we get into this AI competition with China. There are very few states or locations in America or Mexico or Canada that have as much stranded natural gas as West Virginia has.
▶ 1:28:58And that's pure gold for AI. Now, I can speak to you as you know, um, in working with your government, you move permits quickly for that Prime 6 plant you spoke of, and that's why it's happening so fast. Do the same thing in AI development. Allow companies to come there, tap the stranded gas, bring in the turbines, build the facilities, and light up AI. You can't do that right now in Virginia because of the rules and regulations.
▶ 1:29:28We're not allowing gas turbines to work in conjunction with diesel backup generation. And so the sites in West Virginia become prime real estate now for AI. You're going to con you will transform your state's economy by embracing energy because we don't have enough in America. And there's you have senators there and and there's lots of other people in in your government in in West Virginia that understand this opportunity is huge. It's absolutely huge.
▶ 1:29:59Demand is insatiable. You got to tap that and and move at the same speed you did. And I'm just one investor in West Virginia. It's it was a winner state because you got stuff done. And everybody has to hear that message. All right. Thank you so much and thank all of you. Thank all of you for being here today. So, Mr.
▶ 1:30:22Olirri, what if there was a company called WeatherTech, you know, and they um they produce really nice mats for their car. I have them in my F-150. And um and they woke up one day and they looked on Alibaba and they saw that their products were being sold on Alibaba and they looked in they looked at their uh shipping and they you know they never had done any business with Alibaba.
▶ 1:30:48Um and they they looked just like the mats that they produced in uh in Illinois but and they even had their name on it. Right. What could they do to stop this theft of their of their product? And they got they'll get they got nothing for it. What would they what would what would be their recourse right now? There is nothing they can do.
▶ 1:31:13You have just told the story of a million small businesses in America over the last 20 years. They innovate, they create, they're entrepreneurs, they prove their product in the American consumer market. At around 5 million in sales, they're knocked off. By whom? China. Very often, the same plants that ran the molds under a relationship they had with the company.
▶ 1:31:39A lot of companies went to China 20 years ago, 10 years ago, and put their molds there. And the during the day, the company would run the WeatherTech mat in this example here theoretically. And then at night they'd run the knockoff mat and they would bring it into the market, let me guess, 30% off retail of weather of of WeatherTech. And I've seen this happen countless times. And in some cases where the company's very small, they go out of business and nobody hears that tree falling in the forest. It happens thousands of times.
▶ 1:32:10There's such an immense opportunity here to just to enforce existing laws. But really at the end of the day, the reason that Behemoth company couldn't do anything about it, they have no access to the Chinese courts. They can't they can't resolve the complaint through litigation as we do here. So my my recommendation is look, if if you're a Chinese company and you're and you want to use our courts to litigate your complaint, sorry, not until you open yours.
▶ 1:32:39We'd love to work with you, but unless it's a reciprocal playing the whole idea of today's conversation was just to get to a reciprocal playing field, a even playing field. American companies have always been very competitive anywhere on Earth when given a chance on a transparent and competitive playing field. That's not the case in China. I'm I mean, we're all saying the same thing here. It's it's got to get fixed.
▶ 1:33:04But finally, finally, finally, here we are with tariffs being the excuse, but now I think she has to come to the table. And I hope it happens. And I'd like to see tomorrow morning 400% tariffs. So that's say there's the same company called WeatherTech and they know Alibaba is selling in the United States of America to American consumers. They wouldn't be able to uh they wouldn't be able to get money out of Alibaba right No, they can try.
▶ 1:33:32Um, sometimes it's a big enough case they will take it down. Amazon, it's much better if you can prove that you own the IP and uh, you but there they couldn't get any damages out of doubt. I have never heard of a case resolved to the satisfaction of the of the company that's making the complaint ever. Now, there may be a case I don't know of, but the WTO is supposed to provide this platform.
▶ 1:33:54You find me one year since 2020 where there haven't been a plethora of complaints exactly like the one you've just detailed and there's been no consequences. None. Zero. And the Chinese economy has done very very well on the back of stolen IP and ripping tech off and using products at much lower price points that they've made themselves based on American IP. Look, it's got to stop.
▶ 1:34:22I mean it and I'm sure most Chinese people would love to compete. I mean there's great Chinese entrepreneurs. They don't they don't need to cheat and steal. They can't. They they just we just need a level playing field. I I would love to see this resolved and I I hope I hope it happens. But I say and what I've learned and what I've seen in my long career is China understands only one thing, the Give them the stick. respond to the stick.
▶ 1:34:53Hopefully today we'll confirm a new chairman to the Securities and Exchange So what would you ask him to do? What what what do you think his responsibility is? Because so if I you know I used to take companies public and when I took them public I had to have current financial statements. I had disclosed all the material information, right? And so and the SEC enforced it, right?
▶ 1:35:17I had to do it with when I took things public and I sold securities and I had to do it with my uh my 10 Q's and 10Ks uh every quarter and every year. So what should he do right now? He'll be probably be sworn into office tomorrow. What should he do? I assume you're referring to Paul He should go right 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 on GAAP.
▶ 1:35:48Dozens. They should have been delisted two years ago. They're still they're still trading. They're still raising capital. They're still competing with people like me for that money. And they are not compliant with GAAP. There is no way on earth I could do that. I would never have that opportunity. And yet they do. All I want from him and I think you'll hear a a lot of people saying the same thing is you have this mandate now enforce it. Yeah.
▶ 1:36:14What about you know these you know Wall Street firms that say you know look American investors they want to invest in these companies and if we don't if we don't allow them to invest in American stock exchange through American stock exchange they'll just go some other place. What would what would you how what would your response be to that? Um what's going to happen when this law starts to be enforced is and this is the case in almost every regulator the seven big regulators on earth they speak with the SEC practically weekly.
▶ 1:36:44Everybody complies with the law that's actually implemented and enforced in America in one way or another. They don't want to be offside with the world's largest capital market. It's not that they like us. They want access to the largest capital market.
▶ 1:37:00The reason the ADGM in Abu Dhabi doesn't want to get involved with companies that aren't are not the SEC or whatever body it is in the US is because they want access to the world's largest and most liquid capital market and they don't want to ever be It's it's the strength of America and the access to the market and the largest consumers market that gives it its strength
▶ 1:37:30and it hasn't used it. And this administration finally and a lot of people don't like the style of the president. I get it. And listen, with Trump, the way I look at it is I don't focus on the noise. I focus on the signal. What I'm hearing is enough. and um we're going to enforce the laws and that's probably a good outcome for everybody. Although, you know, watching the market go up and down 3,000 points a day is people nash their teeth.
▶ 1:38:00But if that's the price, it's worth it. Chris, is this just theoretical issue that I mean, no, you know, these Chinese companies, we don't really know what the financial statements are, but it's never really a problem. It no one ever loses Has that ever has that ever happened or is it just a theor theoretical problem? No, it it's happened. There's there's been multiple companies.
▶ 1:38:23There was a pharmaceutical company named Kang May where one day it was a going concern and the next day it had a $15 billion hole in its balance sheet. And that was because the CCP decided it was no longer a useful concern for it. And that was part of some of the index funds. That's one of the reasons why we started to get involved in this. And and to answer your to add to what Kevin said on your previous question, they can go overseas if they'd like to, but there there's no rule of law in Hong Kong.
▶ 1:38:52There's no rule of law in mainland China that stands up to our rule of law. And there's also something called the fiduciary duty, which requires you to do diligence, to investigate. You have an obligation to your shareholders to take into account reputational risk to geopolitical risks.
▶ 1:39:10The fact that they might just take over the whole board from a Monday to a Tuesday or that they might impose capital controls which basically absorb all of the retained earnings at that company. That's too big of a risk to take as a fiduciary. So I I think that's a false argument. I've heard it multiple times and that's how I would push back on it.
▶ 1:39:34So if an American investor, let's say 65year-old woman invested in a um mutual fund and they invested in a Chinese stock and you know they lied and unfortunately it went to zero. The mutual fund would not take the money out of the uh it wouldn't take the money out of that poor lady's fault, would they? They they would eat that loss themselves, wouldn't they? Well, no. that fund would bring down the overall return.
▶ 1:40:02I mean, you mean the lady would lose money even though the the mutual fund allowed they they're the ones who bought the bought the stock that didn't comply with GAAP. That's right. That's and that's why the passive index loophole is such a problem because none of those companies comply with any of our laws and yet American money goes straight into them Well, then would the the exchange that that stocks traded on would they take the responsibility so the lady wouldn't lose money?
▶ 1:40:26So if it was in the United States here, I think there could be some recourse against not only the underwriters who brought that stock into our exchange. Has that has that happened? Nope. It hasn't. So So the underwriter who sold this stock of a company that didn't comply with GAAP has no liability in the United That's not been tested yet.
▶ 1:40:50So you think Chinese what do you think the law is wi with with an American company that is has been tested multiple times and the underwriter also is is liable generally now the exchanges are self-regulatory organizations which means they have legal authority to adjust their standards and they're supposed to protect the integrity of their marketplace and if they have companies trading on their market that aren't complying with US laws then they do have some sort of a regulatory obligation to remove them to protect the integrity of the market and the investors who
▶ 1:41:21trade on it. To date, they haven't done that. So, the underwriter has had no personal no liability. The exchange has no liability and the mutual fund has no liability. So, all the money So, if somebody if they all did this, then the only person that's holding the bag is the 65year-old lady that thought she was she was buying into a safe mutual fund. That's correct. Senator, can I add something to that because um I think you made a great point.
▶ 1:41:48Let's say Atkins delists a Chinese company and it immediately goes to London Exchange and says, "Oh, I just got delisted off the New York Stock Exchange and I want to get listed now here." I would think the regulator there would say, "Can you tell me why you got delisted? Oh, uh, we broke the U the law in the US. Oh, please come and list here." I mean, obviously, if you're a mutual fund manager with a mandate, you're not going to want to touch that company.
▶ 1:42:14Once they get tainted by breaking US securities laws, that's a tattoo forever on that board. They're not going to escape it in any market on Earth. It's going to make their shares worth 60% off retail. So, I'm not worried about anybody moving, and I suggest my colleagues 100% right. Once they get delisted for breaking the law, they are radioactive waste in financial services. So, Mr.
▶ 1:42:43F, so if you were if you were the new FBI director, all right, I gave you just something one Florida sheriff said to me. They said, you know, we probably don't really need a lot of help on any more bank robberies like we probably needed in the 30s. What we really need is help on is these international scams because we don't have any ability to deal with these international scams.
▶ 1:43:06What would you what would your recommendation uh to the FBI Sir, I I would recommend a a reshuffleling of resources to include treating these types of scams and frauds as transnational organized crime. um at the moment to some degree depending where you are, but they're generally um looked at as a a white collar crime.
▶ 1:43:32Um the type of investigation that one conducts on white collar crime as opposed to transnational organized crime tend to differ. Um, also transnational organized crime has the ability to rope in agencies all across the United States to assist, which is what you need when you have money mules in 14 different states, victims in 50 states, um, actual organizers in a dozen
▶ 1:44:02different states. You need a team to work those types of cases. Um, I would also I would also step up the amount of interaction on a real-time basis with America's companies, with our private sector, so that the access to that data where the evidence lies happens to to to increase the amount of accomplishment in a shorter period of time.
▶ 1:44:30We could do more cases um with things like bank robberies or other issues that the FBI historically had been involved in that probably local law enforcement has the ability to do on their own. There's probably other areas.
▶ 1:44:47If they actually said, "We're not going to focus on that, but we're going to focus on these international scams." Would the FBI have the resources to put a lot of um a lot of uh smart talent against these international resources international the the FBI hires pretty well, sir. I think they have a lot of good, smart people that can do this.
▶ 1:45:08I will say, I'm not going to speak for the FBI and what their resources um are right now, just just like just like we did with the healthcare fraud task forces in the past. I think it would be appropriate for the Congress, for the Senate to to actually staff those with with budgets, with requirements to say, "Hey, listen. if we're going to ask you to do this, we're going to give you the resources to do it. But if we did as a country, we could accomplish a lot of good.
▶ 1:45:40So Kevin, Chris, if you so let's say I have a new company and I feel really good about it and I want to take it public, right? So is the uh why wouldn't I just pick you know, you know, there's no real reason. I I could pick any exchange in the world, right? Wouldn't it wouldn't be what if um I could would I have any um discount if I said I'm not going to do it here. I'm going to go and do it on the Indian stock exchange or the Hong Kong stock exchange or the Shanghai, you know, stock exchange.
▶ 1:46:09Is there any any reason why I will get more money uh in my uh my trading will be um clearly more liquid if I I pick uh an American exchange? Is there is there is there any reason to have it is there any disc any reason not to do it? Every company on earth pretty well every company on earth if given the option would either list on the New York Stock Exchange or NASDAQ period.
▶ 1:46:35And the reason they would do that is the amount of capital that is interested in investing in a company that's gone through the rigorous compliance and transparency the regulatory laws here on issuing a perspectus and the fact that they could get indexed into the billions and trillions of dollars that are actually invested in indexes where their company might be included. Um the largest index on earth is the S&P 500. It's it's a it's the gold standard. Uh, United States remains the gold standard for public listings.
▶ 1:47:06There's very few exchanges that can compete. A company, most of the time, if they believe they're compliant, will always see the availability of an NYC or NASDAQ listing first. Um, very often they'll try London next. Uh but it's every institutional investor on earth in one way or another puts almost half their capital into one of those two exchanges.
▶ 1:47:35They are the largest on earth and they're they're going to remain that way while the rule of law is transparent and we have an appellet system and we we actually enforce these laws because it's the American economy is actually based on confidence. That's what it is and the belief that it is the most transparent legal system on earth.
▶ 1:48:02Now, we've gone through a lot of issues around it, but we've had these issues before. Why is it even adversaries want to invest their capital here? You have to ask yourself that. It's trust. It's it. So, the answer is more people, even adversaries, trust the United States than any other country on earth. And the the way you can tell is how they vote their dollars. It all comes here.
▶ 1:48:31and anything that by not enforcing laws we actually breach that trust. We should be you know when Atkins comes in here he is the steward of these laws. His mandate is to enforce them to show the world that he and his mandate and the country and the system and the exchanges can be trusted. Anybody that did not enforce those law was was was b was hurting the American brand.
▶ 1:49:02That's what they were doing. And that's got to get fixed. You don't want to hurt the the mothership, the American dream, the American brand that it transcends by partisan politics or any generation. It has to be maintained. And the way you do that is you enforce these laws.
▶ 1:49:16So, I'm I'm very hopeful that you're right that we're going to see a lot of these D-listings and I'm looking forward to it and they can do the right thing and do like I have to comply, pay for that compliance, hire a firm, pay the millions it costs to stay listed and I'm happy they'll do that because I'm happy to compete with them. Hi, Rank Member Jill Brown. I just want to thank the three of you for your excellent testimony.
▶ 1:49:40This was a superb hearing and each one of you contributed a great deal of substance and ideas to the House and Senate, Democrats and Republicans to work hopefully on a bipartisan basis to write some legislation to correct some of these challenges and problems. Um, Senator Scott and I are chairman of and ranking on the Senate Aging Committee. The House members were the special committee on China. So, that was the area of differences in our questions.
▶ 1:50:08But uh I really appreciate the depth of knowledge that each of you have and you've given us great ways that we can work together to protect not only the American dream but protect our parents and our grandparents to make sure they are not continually targeted and um absolutely um scammed out of their hard-earned dollars and their retirement savings. So thank you. Um I think that your recommendations um Mr.
▶ 1:50:35Finta with regard to resources with regard to collaboration with local law enforcement with regard regard to creating um specialized commissions to do this work is very wise and thoughtful. Um Mr.
▶ 1:50:51Aya Cavella, I really appreciated your um recommendations with regard to how we keep uh security firms safe, how we keep um um investments by our um states to be uh protected and good investments. I think your insights in that is is extraordinarily helpful. And I think Mr.
▶ 1:51:12Lier, your insights with regard to um how we uh incorporate how we have laws that protect US-based companies, how we allow for US-based companies to compete worldwide is very important. Uh and I couldn't agree with you more that the stability of US markets and the um the fact that people respect our law enforcement and the oversight and accountability that we can provide in this jurisdiction is worth everything.
▶ 1:51:41uh it's why people want to do business in the United States. So, thank you all for being such important leaders and I appreciate all the contributions you made to us and to this committee. Thank you, Ranking Member. We've got a couple we've got a few House members coming back, but I've got another question. I just want to So, Mr.
▶ 1:51:59Larry, what if there was a there's a company called Bite Dance and owned a a subsidiary called Tik Tok and the US government made the decision, Congress made the decision that they shouldn't do business in our country because it was all Chinese propaganda, right? And they were required to to sell. Now, if that if that happened, it would be whatever the free market would be, they would sell at some price, whatever that price is, right?
▶ 1:52:27But what if the government of China had the right to say no, you can't sell it? And so what happens? What's what's the spread now? What would be the spread probably in a value of something like that? If you say you can't do business, you got to shut down in America for the parent company uh for for Tik Tok or you can go sell to the highest bidder.
▶ 1:52:48What would so what would be a range and how and would that would that be a material disclosure that was was not made um by the underwriters um required by the SEC enforced by an exchange? Yeah.
▶ 1:53:03Um, Tik Tok is the most unique situation in American corporate history because I don't recall ever a company having a law written specifically because of the way it operates. I mean, I've never seen anything like it, and I don't think in in history we've have anything like this.
▶ 1:53:28Not only did Congress pass a law specific to it, but the Supreme Court ruled 9 to0 in further definition and resolution about exactly was intended by that law. However, it has 7 million American businesses operating on it, generating somewhere between 15 and 17 billion of revenue. and in a commercial environment that's of interest to many investors including me and others.
▶ 1:53:58And this is the first time I've ever seen a private equity deal basically where the the actual deal terms are written into a law from Congress and the Supreme I don't I think that's absolutely unique. And now everybody's trying to interpret it interpret what these laws are to actually do this deal. We've now given a new 75day period.
▶ 1:54:21I doubt there'll be another one, but I think there will be a deal done according to the law because there's value there and markets clear at whatever price it has to be. I've heard estimates of as low as 20 billion without the algorithm as high as 40 with it. So, who knows? Apparently, it's pretty clear to me today after what I've listened to that there'll be no algorithm in the deal. So, um, but it it's clearly a change in value, Yeah.
▶ 1:54:49But, yeah, but you know, the it'll be open price. The great thing about American capital markets, it's an open price discovery. Once the rules are placed in place and the investors are there, it's it's going to be negotiated based on whatever the clearing price is. And and I think that would be an orderly way to get this thing done.
▶ 1:55:08I mean, I would prefer to see it and I think it would be better for our Marcus to have the competition of this social media platform as long was operating in compliance with the law, but um you know it's I just have never seen anything like it and I think it's it's a for me it's it's a leg legacy deal of a lifetime. It's just if I'm in any way part of the solution, I'll be very proud here's how I feel about it.
▶ 1:55:35those 7 million small businesses, they're all shark tankers. They're all second generation American entrepreneurs and we should protect them. We should we should make sure they survive this whole thing. It's not their fault. It's it's a shame to shut their businesses down. Whether it's lipstick or clothing or whatever their product or service is, they're generating one to It's a business and there's jobs and there's income. That's it. Congresswoman Henson.
▶ 1:56:05Thank you. Thank you, Mr. Chairman, and to our ranking member as well um for hosting this hearing over on your side. It's great to be over here. Um over and over again, we uh continue to see Chinese companies uh systematically working around and continuing to take advantage of our laws to boost their growth while cutting us out of that process. Uh they've been playing long games in in this case and too often we have been used and outmaneuvered.
▶ 1:56:29And as we've heard discussed today uh many times, uh American retirements and investments have flowed directly into these companies that uh strengthen the CCP's surveillance state and in many cases are tied directly to forced labor violations.
▶ 1:56:43Um, and that's why I recently reintroduced um my bill, the Protecting American Industry and Labor from International Trade Crimes Act, which again empowers the Department of Justice, gives them the tools that they need to better be able to go after the bad guys to detect, investigate, and prosecute these trade crimes, especially those that are frequently committed by the CCP. Uh, duty evasion, trans shshipment, forced labor violations, all the things that we've talked about today that disadvantage American workers and American businesses. Uh so Mr.
▶ 1:57:13Olirri, my first question is uh for you today. How do CCP state subsidies and the dumping practices that they regularly utilize distort our markets? Um and how do they hurt our domestic manufacturers and producers, particularly in rural communities like mine in Iowa? Well, the number one way there's damage done is not abiding by IP laws. Um that that's probably the most long-term uh damage that has occurred because it's small increments.
▶ 1:57:42Um, undoubtedly if you go into your constituency and ask entrepreneurs over the last 40 years, you're going to find many companies that were knocked off in China and nothing was done about it. Some cases they're bankrupt now as a result of you got to think about something. An American company that spends, let's just use small numbers, $10 million in developing their product. Um, and all the R&D and they're going to have to advertise that over the life period of maybe five years on that product. and they put it on the market and it immediately is a hit.
▶ 1:58:12Uh let's and that that would be defined by five five million in annual sales. Five million annual sales generally you're going to make you know 15 to 20% you can support a family you can grow the The minute that's seen by China um particular if it's a weather tech or something so simple that could be knocked off. China did not participate in spending on the R&D. They didn't participate in developing the mold in some cases at all.
▶ 1:58:39They simply let the American company prove the market and then they knocked it off. Right? If that happened stateside within within hours I'd shut that down. It would be easy. You could hire a local lawyer lawyer to do that. Can't do it in China.
▶ 1:58:56And so incrementally over the years, if there's one thing that we could change in this current narrative with China would be to to establish reciprocal IP laws and ways to litigate them and and resolve which was intended in 2020 with the WTO agreement that they agreed to. And then there would be very punitive penalties if that was not abided by. And the best penalty is disallowing access to American capital markets. Yeah.
▶ 1:59:26Um, and in my district, it was actually seed that they stole out of our cornfield. So, you talk about spending billions of dollars on that IP and the R&D that goes into it. Um, they were actually caught in an Iowa cornfield trying to steal the seed by the FBI and FBI pursued the investigation um, and tried to hold them accountable. Actually arrested someone here in the United States. But uh we need more resources to be able to go after these people and actually enforce the trade laws that we do have on the books and uh of course protect these key industries from that unfair competition.
▶ 1:59:56And as you said, they just come in and they let us prove the market. They let us do all the work and then they I've learned something the last two years you should know and I speak to everybody in the room on this. They don't think there's anything wrong with right? It's just how they do business. That's not taught to them when they're young entrepreneurs that there's anything wrong with stealing IP because there's no consequence.
▶ 2:00:18And the only way when a puppy is being Well, I don't even want to use that analogy, but you got to get the stick out, right? This is about protecting Main Street small businesses and those innovators. And um so let's talk about the flow of capital going to these these companies that are then turning around and being used against us. We've talked about the fact that they're able to to trade on our exchanges.
▶ 2:00:43Um one example um Chinese LAR firm Hesai with links of course to the PLA also on the DoD blacklist. Um but they are still trading publicly on the New York exchange. Um I actually sent a letter to NASDAQ last year asking them why are they allowed to to continue to do this um and remain listed. So, um, I want to thank the chairman for his leadership in the Senate on this issue as well. Um, we've tried to hold them accountable here and try and limit this. Uh, but given these very clear national security concerns, u, Mr.
▶ 2:01:12Aavella, why are they still allowed to trade on our markets when we know so very clearly that these dollars are being used against us? Well, hopefully a new sheriff in town 48 hours from now, they won't be. And I really hope that happens. Um, I'll certainly do a shout out for him when he gets confirmed. I mean this is somebody that should be enforcing the law because this is what maintains trust in the system and I hope it happens and there'll be very little consequence to public markets if uh it'll be a big wakeup call.
▶ 2:01:40Other exchanges will look at this and um I think there'll be a reaction uh in China domestically to get on board. Mr. Aavali, did you have anything you'd like to add there too since we were talking about it? No, I I think Mr.
▶ 2:01:54will enforce the holding foreign companies accountable act and the accelerating holding foreign companies accountable act and we will have some a real understanding of what the audits were supposed to be during the period when China was on lockdown and supposedly the PCAOB went over there and conducted audits into their auditing firms. Uh there was a number of state secret privileges that prevented them from doing what they needed to do and I think that Mr. Atkins isn't going to tolerate that.
▶ 2:02:24And hopefully these companies that have been on for almost 2 years now that are non-compliant will start to be removed. And it's possible that the exchanges h are seeing the wind shift and that they can take their own regulatory action and get these people off the exchanges because there's no reason for them to have access to our capital markets. Thank you, Mr. Chairman. Thanks for the indulgence. I yield back. Congresswoman Takuda. Thank you, Mr.
▶ 2:02:53Chairman, and thank you for your patience while we were voting on the House floor. You know, over 73 million Americans across the country, predominantly seniors, depend on the Social Security Administration services. And yet, Social Security's website has been crashing, as you know, repeatedly over the past few weeks. Outages have lasted as long as a day in some cases. Other issues include confusing messages claiming that SSI recipients were currently not receiving payments.
▶ 2:03:20And all of this comes at a time when uh this administration is rolling out a new policy for identity proofing that will require millions of beneficiaries to set up an account online or show up in person, adding to the confusion. Now, we know why this is happening. In the past few weeks, Elon Musk and Doge have cut over 7,000 jobs from the Social Security Administration and are planning more, including a 50% cut to the AY's technology division responsible for its website and other online platforms.
▶ 2:03:47Last year, during the massive crowd strike outage, we saw an uptick in online scams to take advantage of the situation at hand. Our own Department of Homeland Security put out a bulletin warning of increased fishing and malicious activities. My concern is that DOA's reckless efforts to cut Social Security's technology division and roll out sweeping new policies that require seniors to go online are creating that same opening for scammers to take advantage of seniors and threaten their hard-earned benefits. Mr. Dr.
▶ 2:04:16Finta, would you agree that the instability in Social Security's website presence and online platforms is creating unnecessary uncertainty among our nation's seniors and others who depend on Social Security and creating opportunity for China to both spread propaganda and for scammers to use this as an opportunity to exploit our elders? Ma'am, that's not my area of expertise in terms of the uh the markets and the the confusion if if there's a law.
▶ 2:04:45How do you deal with preventing fraud and abuse among seniors? And right now, are seniors you're finding concerned about their social security benefits as a result of mixed messages they're getting online and proof of authentic their identity? does tend to support criminal activity, if that's what you're getting at.
▶ 2:05:06I think what I'm getting at is that if seniors are worried right now that they may not be getting their payments because they've actually gotten email messages that were incorrect that they if they have to make changes they have to go in person or create online platforms and in rural America like where we live you can't always get physically to a site.
▶ 2:05:23Uh, and so if you have this opportunity present itself to scammers, scammers are often looking to exploit situations like when people are scared or when there are changes in systems or even changes and updates to malware and whatnot. Do you think that this potentially could create an opportunity for them to exploit seniors given the confusion and actually the lack of staff? As was mentioned at the very beginning of the hearing, people won't even necessarily get someone answering the phone for hours if they call for help to Social Security.
▶ 2:05:52Is this a potential opportunity for scammers that we are seeing right now? There's no doubt in my mind that given the opportunity, transnational organized crime groups would take advantage of that situation. And if we had a situation where actually cutting tech staff that help to maintain these platforms, are we not creating a more vulnerable environment for scams on our seniors and our social security I don't I don't disagree with that statement,
▶ 2:06:22ma'am. Okay. I see that I've used quite a bit of my time. I did want to move on to reports that we saw in February from Wired that reported at least eight scam compounds in the Myanmar Thailand border region were using SpaceX Starlink terminals to connect to the internet and to carry out their operations. And between November 2024 and February 2025, there were over 40,000 login to Starlink from known scam centers in the regions.
▶ 2:06:50I think ranking member um Krishna Morphy was actually pointing some of those out. Mr. from your work protecting American seniors from fraud and other forms of financial exploitation as well as your law enforcement background. How important is it that companies like SpaceX and Starlink and other companies providing similar technology develop robust processes to crack down and be an ally on trying to prevent these kind of abuses of their systems that target American elders and retirees?
▶ 2:07:17Ma'am, it is my experience that these companies do have anti-fraud and vulnerable persons programs and they do work towards those efforts. Individually, it is difficult for those companies in my opinion to have that kind of success as much as what we could if we had an all of government or an all of society approach towards supplementing those efforts. Um I'm not specifically familiar with the uh with the Starlink. Okay.
▶ 2:07:48Well, it seems that we there are actually a growing number of vendors that are openly advertising Starlink access as a solution for online scam operators. So, we clearly need to work closer with them to make sure that we prevent and stop this fraud and abuse on our our senior population. Thank you very much, Mr. Chair. I yield back. Thank you, Congressman Bar. Thank you, Mr. Chairman and Mr. Chairman.
▶ 2:08:09uh thank you for this unusual uh unique but very important biccameal uh hearing I think which underscores uh the the threat that we face here. In February, President Trump issued the America first investment policy memorandum that directs federal agencies to address outbound investment into into China. Congress has been focused on this issue in multiple congresses.
▶ 2:08:31And in this Congress, I've introduced uh the Fight China Act, formerly known as the Coins Act, to prevent outbound investments into Chinese military and surveillance companies. The Fight China Act also aligns with the president's memorandum by taking both an entitybased approach and a technology-based approach. Uh this is important because uh sanctions uh do provide a multilateral effect.
▶ 2:08:59Uh but not all civil military fusion happens with just listed entities. We've seen uh quite a bit of venture capital and private equity flows into private non-listed entities and therefore a technology uh focus is important. Mr. ALA, can you discuss why a law that prohibits US outbound investment uh into both specific entities is needed but also uh clearly defined technologies of national security concern?
▶ 2:09:29Why why is that second piece so important? Thank you for the question and and we supported your legislation and we like the approach that you've taken because we always thought that you can do you can turn up the dial on specific companies but you needed to attack the entire sectors that are posing a national security threat. And there's more than just public capital as you said that's going over there. It's private capital, venture capital, uh private equity and public capital that's going over there.
▶ 2:09:57But what's even more of an issue is that you have companies that are good subsidiaries of subsidiaries of subsidiaries and maybe the parents on one of the DoD lists or or uh the entity list and you can't get to them unless you prohibit the sectoral investment in in those Chinese companies. And so I I appreciate your approach. I think you've threaded the needle there and we we strongly support it.
▶ 2:10:21We want to give the private sector uh the red light green light approach, but we think we can we can get at this problem and accomplish that by clearly defining the technologies of concern. Um Mr. Liry, the Fight China Act, this bill that I've introduced requires the Treasury Department to regularly review whether companies on US government blacklists such as commerce export controls, uh sanctions, uh DoD lists, um whether they should be added to this Treasury uh CMIC
▶ 2:10:51list, uh the investment blacklist for Chinese military-industrial firms. List coordination is necessary to ensure we treat entities consistently. Can you touch on how alignment within these various government prohibitions of Chinese entities eases the compliance burden for US firms uh to determine whether or not they they can invest in Yeah, I mean that's one of the great challenges.
▶ 2:11:12Uh you don't want to go through the the the cost uh of of starting a deal or an investment and doing the diligence on it only to find out that it's going to breach this this law. And so um one of the it's almost like a cifhious issue. You don't know the outcome till you test it. And so if there was a better way to do that where uh particularly in a larger transaction where they could just come to staff and say look we want to invest a billion dollars in this thing.
▶ 2:11:41Is it going to is it going to pass or not? or do we actually have to test it? Yeah. And we have a provision in the bill that would allow for that guidance uh for investor. That would be the very best thing to do because then on a no names basis you can just go in and say look there's a very material transaction. If you're not okay with it just tell me now because nobody wants to that burdening it with litigation which has been a problem lately is not the answer. Just yes or no that's much easier. Yeah.
▶ 2:12:11and and and I think we we threaded that needle by not having kind of a reverse cifus but it's a clear red light green light system there. Mr. uh Illao in your testimony you refer to passive index loophole uh and state that there more than 2,000 US mutual and exchange traded funds that have 294 billion invested across Chinese stocks and bonds. Uh the concern obviously is that American investors may be unwittingly financing the Chinese military uh industrial complex.
▶ 2:12:37Can you explain how the Fight China Act would curtail that I think the Fight China Act would go a long way to curtailing the loophole, but I also think that there needs to be a straight prohibition because what you'll find is that New York lawyers are going to come down here and they're going to try to create loopholes to the loophole and they're going to interfere with what it is that you're trying to do, which is very novel in stopping our money from going and funding the Chinese Communist Party's technological and military rise,
▶ 2:13:07as well as their funding of the surveillance state, which aids and it bets the interament of weaguers. So, I think that your your bill does a lot and I think that it it goes a long way, but it needs to be much broader because the CCP owns a stake in everything. Great. Thank you. Yield back. Thank you, Congresswoman Brown. Thank you, Chairman Molinar, Chairman Scott, Ranking Member Christian Morphy, and Ranking Member Gillibrand for holding today's hearing. And thank you to our witnesses for being here.
▶ 2:13:36The topic of today's hearing could not be more urgent. I represent Ohio's 11th district, home 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 foreign adversaries and fraud.
▶ 2:13:59Today's threats include everything from shadowy financial schemes backed by the chi Chinese Communist Party to sophisticated online scams preying on older Americans. These threats require a whole of government and whole of society response. I want to take a moment to acknowledge the essential work of federal agencies like the Consumer Financial Protection Bureau, the Federal Trade Commission, and the Department of Justice and the FBI.
▶ 2:14:27These agencies are on the front line fighting fighting fraud and financial abuse targeting older Americans. The CFBP has proposed bringing big tech and non-bank payment platforms under federal supervision, something that's long overdue. Scammers use these peer-to-peer apps to target seniors, and these platforms operate in a regulatory gray zone. The bureau's rulemaking would make would help close the dangerous loopholes.
▶ 2:14:57The FTC has also shined a light on scams like romance fraud, tech support cons, and cryptoreated schemes. While DOJ's Elder Justice Initiative has gone after the criminal networks behind them. This rise in fraud through payment apps and other digital tools is staggering, and these platforms still fall outside traditional oversight. That's why the CFB's proposals matter. Mr.
▶ 2:15:21Fenta, given how much elder fraud is um occurring on these platforms, how urgent is it for Congress to support CFPB's efforts and close the regulatory gap and what additional safeguard should we look at to protect seniors as these tools continue to evolve? I appreciate the question and you are correct. each of those agencies has a role to play in in the overall process of not only preventing frauds, but going after the folks that do propagate them.
▶ 2:15:51I think that's one of the big things that that gets lost in the shuffle here to some degree is the lack of enforcement overseas where a lot of these folks feel like there is no consequence. They're never going to get caught. And that disincentive is incredibly important in the overall plan, the structure. I actually had a conversation with an Indian journalist one time who said you have to arrest enough people that they think they might be the next one and that has to happen for this thought process to work.
▶ 2:16:18Now in terms of the the regulatory side of thing again that's that's outside my area of expertise. However the regulators in this country along with the enforcers and private industry all have to be on the same page for this to actually work. 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 uh amount. Thank you.
▶ 2:16:47Instead of closing the door on scammers and fraudsters, Republicans want to reopen it and let them in by overturning the CFBP's rule to regulate payment platforms. I am glad that all Senate Democrats voted against overturning this Biden administration rule and I will do the same next week. Still, the scale of the threat demands more. The FBI reports that Americans over the age of 60 lost more than 3.4 billion to fraud in 2023, up 11% from the year before.
▶ 2:17:16And we know that this is likely an undercount because many cases go unreported out of fear, embarrassment, or shame. These tactics from pig butchering crypto scams to grandparent schemes are designed to be deeply personal and emotionally manipulative. At the same time, many seniors retirement savings are being funneled into CCP linked firms, often without their knowledge through passive investment structures structures.
▶ 2:17:39That includes companies using corporate shells designed to evade both China's and US invest in investment pro protections and firms tied to military and surveillance industries through CCP's made in China 2025 strategy. We need to shed light on these investments and make sure our system isn't helping the Chinese Communist Party exploit retirees. That means increased transparency for investors and it means greater support for federal enforcement. Mr. delivery with my few minutes.
▶ 2:18:06You spoke about how mi millions of Americans are unknowingly exposed to Chinese through Chinese firms through passive index funds. What specific steps can Congress take to help investors, especially seniors, clearly understand where their retirement dollars are going to ban the use of VI um which are a structure used for what I would call a faux share. Uh these get indexed.
▶ 2:18:32In other words, you think you own a stock certificate with a voting right to it when you don't. It goes to a Cayman structure. I don't know why we would allow that to go into anybody's um pension plan. I mean, this is this is a a shadow share is what it is. And yet, uh we allow it.
▶ 2:18:50And the other is um is to actually just enforce existing laws around the golden share because you know if you if you hold a company just make an easy example you have a $100 in a in an index fund and you've got 10 companies $10 in each one and one of them just goes to zero and there's many examples of these Chinese golden share companies just going to zero and you don't know why you've basically lost the value of that index is now $95 and Why put it in
▶ 2:19:20there in the first place? You know, even if the law allows to have I don't know how that's going to happen, but you know, we've been talking today about delisting all these companies, and I think that might be happening soon. But sprinkled out throughout all of our indexing and all of our pension and all of the diversification through the system that we have built that has protected seniors investments for decades. We've let this cancer creep into it. And to stop this, it's to simply enforce the existing laws and add new ones.
▶ 2:19:51I don't want to own a VIE if I'm in if I'm an an indexed pensioner. Why would I want to own that? A Cayman shadow share from a a a company with a super preference. I mean, it's so just not what they should own that we just should say sorry. You know, the answer is no. You can't put that in this index. It's a it's just a simple applying existing laws and fine-tuning to remove the tumor that's in there.
▶ 2:20:19This is a cancerous tumor in our financial services system and uh we have good doctors here. So chop chop. Let's just cut them out. My time is expired. Thank you for your courtesy, Mr. Chairman. And thank you, Mr. Wonderful. Thank you, Chairman Molinar. All right. Thank you. Uh Mr.
▶ 2:20:39Just to follow up on that discussion, um the Trump administration uh is having an ongoing review of Orisa standards to ensure that foreign adversary companies are ineligible for pension plan You've been talking a lot about these issues, the lack of uh investor you know, the um geopolitical risk, the lack of the ability to do diligence
▶ 2:21:09on some of these things. Um you just mentioned the you know shadow shares and I guess you know when you talk about how 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 and I and I like to ask all of you this you know the majority of index
▶ 2:21:39funds or ETFs are administer istered by fiduciaries inside large distribution companies, you know, like a Fidelity or Schwab. And they they just their job is to be compliant. And so it's very rare that they ever go rogue and put anything into an index uh that is not uh permitted by law, And so it's just a matter of of uh making sure that we we give them good definition of what is not permitted and they will comply.
▶ 2:22:0899% of them will comply. So, we've built in great safeguards for this stuff. We just haven't really implemented um or or made them uh obvious enough because when you ask how many investors if I took 10 people in the hall outside here and ask them, "Do you know what a VI is?" They'd say, "No." Do you own one? I have no idea what that is. Right? It is not a real share.
▶ 2:22:30and and it's we have let uh Chinese companies rig or or take advantage of the system we've provided and the lack of of enforcing it to get to this extreme point and and I don't know the exact amount. I'm going to guess guesstimate that how many Chinese companies listed on NASDAQ and I I'm going to guess between 700 and 800 billion worth of market cap.
▶ 2:22:57majority of them should be delisted if if we uh if we enforce the laws as they should be enforced. And many of them in my guess would say, "Wait a minute. I'm sorry I didn't get it done in the last 24 months, but I am going to hire American Council. I am going to uh I'm going to get compliant." And it would be a great first step because you would force the transparency and then the, you know, the you know, I used to be in the ETF business.
▶ 2:23:21Every single firm that distributed it, we had to go through the whole compliance process cost millions of dollars. But the system works. If you want to index, you got to make sure that you know what you're putting in there because other people are relying on and trusting you to do it. And we've been talking all day about how we're actually eroding the system by not enforcing these laws because people when they start to learn about shadow shares and viees are saying, "What the hell is this Like why is it in here?
▶ 2:23:51But I'm I guess what I'm wondering is let's say you know I'm someone who has an account at Fidelity or some other and I go to my financial advisor and I'm trying to get advice on this would they even know VIES would they or would they just simply say this is no they rely on their compliance departments some do some some you know raas and some advisers do but not many they just rely on the system and so you got to make sure the system works you got to change the Yeah. Okay.
▶ 2:24:21Mr. Yeah. If the VIEs are in an index fund, then it's the obligation of the fiduciary to track the index fund and that's what they do. And the CCP, it's been reported they pressured MSCI and others to actually expand the percentage of Chinese companies that go in these index funds and they'll continue to do it. And the VIE structure, there's no economic rights, there's no voting rights, there's no control over the board. Uh, and then these these companies get to list in our marketplace.
▶ 2:24:50And one of the largest risks that we haven't talked about, if Kevin sells his shares of his public company, what do you have to do? You have to disclose it immediately. Right? They don't have to do that. A foreign insider can sell and all of their shares in the company from day one to day two, and you're not going to know about it until the stock price just keeps going down as information leaks out. Who gets harmed by that? Thank you. I yield back. Congressman Stanton. All right.
▶ 2:25:20Thank you very much, Chairman Scott and Ranky Miller, Ranking Member Gillibrand, and of course, Chairman Mullinar from the House side, uh, Ranking Member Christian Mory. This is a very important hearing. I'm glad that you made the time to host us here today. I represent the state of Arizona, which the state that has the unfortunate distinction of having the highest rate of elder fraud in the United States of America. In 2022, more than 3,500 Arizonans were scammed out of $82 million. That's just the scams we know of.
▶ 2:25:51Many seniors never report that they have been victimized. The United States government identified that organized crime in the People's Republic of China are some of the most sophisticated perpetrators of financial fraud. In fact, according to the UN, the majority of pig butchering scams where fraudsters take their time to earn the trust of the victims and dupe them into sending increasingly larger amounts of money are perpetrated by these Chinese criminal networks. They prey on fear and isolation.
▶ 2:26:19They pose as investors, promising lucrative returns, tech support, law enforcement, romantic partners, friends, and family members. And thanks to the increased use of AI, which can mimic human voices, these scams are becoming more elaborate, more convincing, and harder to detect, the federal government needs to do more in coordination with our international allies to crack down on these criminal enterprises and protect seniors. Mr. Fenta, you have spent two decades at the FBI working on transnational organized crime.
▶ 2:26:49You testified here this morning that US law enforcement does not have the resources to effectively pursue complex transnational elder fraud cases. Uh you may have already covered this, but cover it again. It's worth covering again. Um give us a better description of the resources that the Elder Justice Task Force needs now more than ever, especially in light of especially as law enforcement tries to keep pace with criminals use of AI and other evolving I appreciate that.
▶ 2:27:15And and I would like to clarify that the uh the FBI, HSI, Secret Service, IRS CID, all have very capable agents who can and do do these investigations on a regular basis. The issue there is is the volume. It's it's the number.
▶ 2:27:32Um, and while you're working a 18-month, 24-month investigation during that time, there are thousands and thousands and thousands of people all being scammed and defrauded during that time frame and losing their life savings. So, it's not that it is it is beyond our capability, it's it's beyond the resources in terms of the fire hose in the face of of these investigations.
▶ 2:27:57And and yes, if if the individual agents um and officers and um investigators are working these cases, as you work it, you gain more intelligence, which means you need more subpoenas, which you need more time, and you need more analysts, and it grows like that giant spiderweb that always see on the wall in TV.
▶ 2:28:18Um the the issue here is the aggregation of those cases essentially with the private sector to to grow those cases quickly and effectively so you can do more of them to provide that disincentive. I don't think we're going to be able to arrest our way out of this problem, but I think it's a giant factor that could contribute to reducing it over time. Okay. I appreciate the point well made.
▶ 2:28:45These last few days have been incredibly volatile with the stock market down more than 10% uh with the change in tariff policy. It's coming back up today. Thank goodness. Um but especially for our seniors who may be living off their retirement accounts, that volatility is scary and fear is something the scammers prey off of. Uh, as fear grows, scammers will find easier targets.
▶ 2:29:14As retirement accounts shrink, scammers will find will land harder blows. Mr. Iavella, uh, can you speak to how fraudsters how they target American retirement accounts and how falling victim to one scam will too often make you a target for the next Yeah, that's exactly right, Congressman. The one of the things I'd like to follow on what Mr. Finta said is that the public private partnership in this area is crucial.
▶ 2:29:42We need to be able to tell the government exactly how we're being attacked, who's attacking us, and what different sophisticated technologies they're using and methods that they're using in order to get at our customers. Because it's our customers who they're attacking. They get in their emails, they reset rules in the emails, they redirect things so people don't even understand what's happening. And it even looks like to our membership that it's coming from their customers.
▶ 2:30:08Then once the customer is scammed, people know about it and somebody else comes in who probably was part of the and says to them, "Hey, if you just pay me $1,000, I will help you to try to recover some of the funds that just left the country." That's the that's the first piece. And then it just drags on for a little while longer. Then you get another thousand, another thousand. before you know it, they're out another 10 or $15,000 by the same people and they don't get their money back and they've been scammed again.
▶ 2:30:37And that's exactly what you're talking about about All right. Thank you very much. Uh look like Mr. Olier may have a Were you going to jump in an answer on that as well? Okay, I yield back. Thank you. Thank you. I'd like to thank everyone for being here today and participating in this incredibly important discussion on the threats posed by the Chinese Communist Party on US investments. Here's the takeaway for everyone, especially American seniors. Make sure your dollars are not invested in communist China.
▶ 2:31:07I look forward to continuing to work with members across the island down the dice on this very important topic and hope that today's hearing will resonate with the millions of Americans approaching retirement to take action today to make sure their hardearned money is safe. If any members have additional questions for the witnesses or statements to be added, the hearing record will be open until next Wednesday at 5:00 p.m. Thank each of