Young people, minorities among those reporting the biggest losses

By Jenny Manrique

The promise of hefty returns is what initially drew Jeffrey Vaulx, a second-grade special ed teacher in Memphis, Tennessee to go in on a cryptocurrency investment opportunity introduced to him by a Facebook friend.

Vaulx would soon discover that he had been taken by a scheme that data from the Federal Trade Commission (FTC) shows is part of a billion-dollar industry in the United States.

Vaulx set up an account on a website that he says, “looked legitimate.” He then transferred $500 cash to his friend, who was supposed to purchase the cryptocurrency – a form of unregulated digital money where transactions are verified through digital ledgers. His investment quickly grew to $8000, though to access that newfound wealth Vaulx learned that he would have to pay an additional fee of $500.

That’s when he says the red flags began to appear. “I went back to my friend’s website and saw it was all a hoax,” he recalled. “Fraud was in the back of my head.”

Vaulx was among a panel of speakers during a September 9 media briefing organized by Ethnic Media Services and the FTC.

Experts at the FTC stress that most cryptocurrency scams start with an unsolicited message, either through text, email, or social media. “Social media and crypto is a very combustible combination,” said Cristina Miranda, consumer education specialist at the FTC Bureau of Consumer Protection.

“Just know that a lot of these scams start off with tips or secrets on online message boards,” Miranda added. “There’s not going to be a whole lot of detail about what you’re investing in, because scammers are always trying to get you to be emotionally invested.”

According to the FTC’s Consumer Sentinel Network, an online resource for tracking scams, from January 2021 through June 2022 cryptocurrency scams have cost consumers over $1.3 billion. Nearly half of those victimized say the scam began with an ad, post, or message on social media.

The largest share of the losses, about $785 million, involved bogus investment opportunities, followed by romance scams at $220 million, business imposters at $121 million, and government imposters at $56 million.

Miranda explained that romance scams or online dating scams involve charming the intended target before offering help with cryptocurrency investing. That’s when the request for money typically comes in.

In the case of fraudulent business scams, victims will often receive unexpected texts or security alerts popping up on their screens claiming to be from well-known companies like Amazon or Microsoft.

“If you click on any link, you will be connected to a scammer who tells you about fraud on your (cryptocurrency) account and that your money is at risk,” said Miranda.

Other scams attempt to impersonate government agencies, warning potential victims that their accounts or benefits will be frozen as part of some investigation.

Young people aged 18-35 and minority populations are among the groups that have reported the highest losses. These groups, Miranda explained, typically exist “outside the traditional financial ecosystem, they typically are unbanked and most open to using these emerging payment technologies.”

The unregulated nature of cryptocurrency — which exists outside traditional financial systems — has made it both more attractive to smalltime investors and opened the door to a ballooning scam industry.

And because transactions happen digitally, with no middleman involved, getting money back for victims has proven to be difficult, said Elizabeth Kwok, assistant director of litigation technology and analysis for the FTC’s Bureau of Consumer Protection.

Kwok added that because cryptocurrency is not backed by any government there is significant volatility in the market. “There is nobody overlooking the system… If there’s a run on a particular exchange, no entity is going to step in and make sure that consumers can get their money back.”

Since 2021, Bitcoin — the largest cryptocurrency by valuation — has fallen from a high of $60,000 per coin to as low as $22,000. The entire crypto market has dropped from a valuation of over $3 trillion to just over $1 trillion today.

Kwok noted the Biden administration is working to impose some regulation over the crypto market. “They are aiming for a more coordinated regulatory environment,” she said, pointing to an executive order from the president in March that directs federal agencies to implement policies and regulations for assets including cryptocurrencies.

The IRS currently taxes crypto assets as physical property like a car, and if they are used as an investment, the Securities and Exchange Commission gets involved, Kwok said.

“Education is really the first line of defense when it comes to avoiding problems in the marketplace,” said Rosario Mendez, senior attorney with the FTC Division of Consumer and Business Education.

As part of that effort Mendez urged people to come forward and report scams in their communities. “It’s really important,” she said, “so we can do something about it and alert others about these problems.”

“There are real people out there being hurt by this,” Mendez concluded.

Where to Report Scams

Victims can report scams directly to the FTC through its website in English and Spanish, as well as through the website of the regulatory agency Commodity Futures Trading Commission and the US Securities and Exchange Commission

More resources are available at ftc.gov/cryptocurrency and in Spanish at ftc.gov/criptomonedas.

If you or someone you know is the victim of a cryptocurrency scam, you should also report it to the cryptocurrency exchange involved. The FTC also recommends sending complaints to your state attorney general.

by Peter White

Ethnic Media Services

On October 31, the Supreme Court will hear two cases that will determine the future of affirmative action. Students for Fair Admissions (SFFA) is suing Harvard and University of North Carolina (UNC) for considering race in their application process. Further, SFFA says Harvard’s admission policies discriminate against Asian American applicants.

SFFA is a creation of conservative activist Edward Blum. He claims his non-profit has 22,000 members who were wrongly rejected by universities that use race conscious criteria to evaluate prospective students. None of Blum’s 22,000 alleged victims have testified. However, one was described but not named in the Harvard case as a Chinese student with first generation immigrant parents, perfect test scores and the best GPA in his class of 460.

In 2022, UNC received 43,500 applications for a freshman class of 4,325. UNC rejected 40,000 applicants. At that rate, if the top two dozen schools are considered, Blum’s 22,000 students account for just 2 percent of total rejections. That number falls to a negligible 0.0055 among the top 100 schools.

This is not a big problem, proponents of affirmative action say, especially given the fact that Harvard and UNC argue race in admissions creates campus diversity. The Supreme Court has held that to be a legitimate goal going back to the Bakke case in 1978.

In that case the justices threw out racial admission quotas but opened the door to the modern diversity rationale that was affirmed by the Court in Grutter v Bollinger: “The Equal Protection Clause does not prohibit the Law School’s narrowly tailored use of race in admissions decisions to further a compelling interest in obtaining the educational benefits that flow from a diverse study body.”

Blum argues that race-conscious admissions violate the Equal Protection Clause of the Constitution and Title VI of the Civil Rights Act of 1964. He has brought four lawsuits in recent years but has yet to win one. Given the 6-3 conservative majority on the high court, Blum’s ship could finally be about to come in.

“I think it is too early to tell what the Supreme Court will do with respect to the Harvard affirmative action case. Obviously, we are very concerned based on the Court’s makeup, but we also know that for several years now, in repeated attempts by the conservative elements, affirmative action cases have remained on the books and there is strong precedent on the books for the continued use of race in admissions policy,” said John C Yang, President and CEO, Asian Americans Advancing Justice-AAJC.

Yang spoke during a media briefing on the upcoming SCOTUS cases.

Yang noted that both the district court and the appellate court concluded there was no evidence of discrimination against Asian Americans.

“In the case of Harvard, Asian American enrollment at Harvard has increased significantly. They make up nearly 28 percent of the most recently admitted class, even though Asian Americans make up only approximately 7 percent of the American population,” he said.

Yang added that a number of surveys since 2010 found two-thirds of Asian Americans support affirmative action. He said that if Harvard stopped considering race in admissions the number of Black students would decline from 14 to six. Latino students would drop from 14 to nine. A Georgetown University study came to the same conclusion.

David Hinojosa is with the Lawyers’ Committee for Civil Rights Under the Law. He will be arguing the UNC case in front of the Supreme Court on October 31st at 10 am.

“A lot of people are betting against affirmative action. They’re betting against fairness and opportunity. But the history is on our side; the Constitution is on our side; the law is on our side, and so are the facts,” Hinojosa said.

The stakes couldn’t be higher, Hinojosa noted.

“They don’t want to just get rid of affirmative action. They want to completely whitewash history and reinstate all the privileges of yesteryear to today,” he said.

SFFA didn’t put any students on the stand. Harvard did. Sally Chen was one of them. The daughter of working class immigrants who speak limited English, Chen said she wouldn’t have the benefits of a Harvard education if not for Harvard’s race-conscious admissions policies.

“My dad was a cook in a Chinese restaurant and my mom worked in a bakery in Chinatown. Our family of six grew up in a one-bedroom apartment in San Francisco, and we struggled to make ends meet. I went to public schools all my life, and from a really young age, I often translated and advocated on behalf of my parents,” Chen said.

Applying to Harvard, Chen ignored her high school counselor’s advice and talked about her background. She said that was really crucial to “getting across who I am, why I want to do the work that I do today, and having this context made me a much stronger applicant.”

Today, Chen advocates for policies that open educational opportunities for all, but especially for limited English-speaking immigrant families, at Chinese for Affirmative Action in San Francisco.

“Having diverse perspectives at the table really made our education stronger, and it is an asset to the work that I do today where cross-racial coalition building is really key to what I do,” she said.

Chen was one of the couple hundred signatories to the amicus brief filed by the Legal Defense Fund (LDF) in the case. The fund represented 25 Harvard student and alumni organizations.

“All students deserve a fair shot at going to college, regardless of their income, where they grew up, or their racial and ethnic background,” said Michaele Turnage-Young, LDF Senior Counsel.

She said minority students, often poorer than their white counterparts, have less of an opportunity to amass the credentials that colleges consider in admissions. They are three to six times more likely than white students to attend a high poverty school.

“And many attend majority minority schools, which generally have, like high poverty schools, less experienced teachers, less advanced courses, inadequate facilities, less extracurricular activities, less arts instruction, less recess, and fewer classroom resources.”

College admissions officials try to balance out those things by looking at which minority students show the best potential even if their test scores aren’t the highest.

The plaintiffs in the case say admissions criteria should be color-blind.

“Our clients, in particular, are concerned that erasing race from the admissions process will make it impossible for applicants of color to present their authentic selves in their college application,” Turnage-Young said. Chen echoed that sentiment. “We wanted to get across how we wouldn’t want to be at an institution that didn’t value us,” she said.