[Senate Hearing 119-80]
[From the U.S. Government Publishing Office]
S. Hrg. 119-80
FINANCIAL AGGRESSION: HOW THE
CHINESE COMMUNIST PARTY EXPLOITS
AMERICAN RETIREES AND UNDERMINES
NATIONAL SECURITY
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JOINT HEARING
BEFORE THE
SPECIAL COMMITTEE ON AGING
AND THE
U.S. HOUSE SELECT COMMITTEE ON
THE CHINESE COMMUNIST PARTY
UNITED STATES SENATE
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
__________
WASHINGTON, DC
__________
APRIL 9, 2025
__________
Serial No. 119-06
Printed for the use of the Special Committee on Aging
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
60-494 PDF WASHINGTON : 2025
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SPECIAL COMMITTEE ON AGING
RICK SCOTT, Florida, Chairman
DAVE McCORMICK, Pennsylvania KIRSTEN E. GILLIBRAND, New York
JIM JUSTICE, West Virginia ELIZABETH WARREN, Massachusetts
TOMMY TUBERVILLE, Alabama MARK KELLY, Arizona
RON JOHNSON, Wisconsin RAPHAEL WARNOCK, Georgia
ASHLEY MOODY, Florida ANDY KIM, New Jersey
JON HUSTED, Ohio ANGELA ALSOBROOKS, Maryland
----------
McKinley Lewis, Majority Staff Director
Claire Descamps, Minority Staff Director
U.S. HOUSE SELECT COMMITTEE ON THE CHINESE COMMUNIST PARTY
JOHN R. MOOLENAAR Michigan, Chairman
ROBERT J. WITTMAN, Virginia RAJA KRISHNAMOORTHI, Illinois,
ANDY BARR, Kentucky Ranking Member
DAN NEWHOUSE, Washington KATHY CASTOR, Florida
DARIN LAHOOD, Illinois ANDRE CARSON, Indiana
NEAL P. DUNN, Florida SETH MOULTON, Massachusettes
DUSTY JOHNSON, South Dakota RO KHANNA, California
ASHLEY HINSON, Iowa MIKIE SHERRILL, New Jersey
CARLOS A. GIMENEZ, Florida HALEY M. STEVENS, Michigan
GUS M. BILIRAKIS, Florida RITCHIE TORRES, New York
YOUNG KIM, California SHONTEL M. BROWN, Ohio
NATHAN MORAN, Texas GREG STANTON, Arizona
ZACHARY NUNN, Iowa JILL N. TOKUDA, Hawaii
----------
Dave Hanke, Majority Staff Director
Jason Rodriguez, Minority Staff Director
C O N T E N T S
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Page
Opening Statement of Senator Rick Scott, Chairman, Special
Committee on Aging............................................. 1
Opening Statement of John R. Moolenaar, Chairman, Select
Committee on the Chinese Communist Party....................... 3
Opening Statement of Senator Kirsten E. Gillibrand, Ranking
Member, Special Committee on Aging............................. 4
Opening Statement of Raja Krishnamoorthi, Ranking Member, Select
Committee on the Chinese Communist Party....................... 5
PANEL OF WITNESSES
Kevin O'Leary, Chairman and CEO, O'Leary Ventures, Miami, Florida 7
Christopher Iacovella, President and CEO, American Securities
Association, Tampa, Florida.................................... 8
Brady Finta, Founder, National Elder Fraud Coordination Center,
San Diego, California.......................................... 10
APPENDIX
Prepared Witness Statements
Kevin O'Leary, Chairman and CEO, O'Leary Ventures, Miami, Florida 52
Christopher Iacovella, President and CEO, American Securities
Association, Tampa, Florida.................................... 55
Brady Finta, Founder, National Elder Fraud Coordination Center,
San Diego, California.......................................... 64
Questions for the Record
Christopher Iacovella, President and CEO, American Securities
Association, Tampa, Florida.................................... 68
Brady Finta, Founder, National Elder Fraud Coordination Center,
San Diego, California.......................................... 69
Statements for the Record
Senator Rick Scott Letter to SEC Nominee......................... 74
FINANCIAL AGGRESSION: HOW THE
CHINESE COMMUNIST PARTY EXPLOITS
AMERICAN RETIREES AND UNDERMINES
NATIONAL SECURITY
----------
Wednesday, April 9, 2025
U.S. Senate
Special Committee on Aging
Washington, DC.
The Committee met, pursuant to notice, at 2:30 p.m., Room
106, Dirksen Senate Office Building, Hon. Rick Scott, Chairman
of the Committee, presiding.
Senators Present: Senator Scott, McCormick, Justice,
Johnson, Moody, Husted, Gillibrand, and Kim.
Represenatives Present: Representative Moolenaar, Barr,
LaHood, Hinson, Bilirakis, Krishnamoorthi, Castor, Stevens,
Brown, Stanton, Tokuda
OPENING STATEMENT OF SENATOR
RICK SCOTT, CHAIRMAN, SPECIAL COMMITTEE ON AGING
The Chairman. The hearing will now come to order. First,
let me welcome our colleagues from the U.S. House Select
Committee on the Chinese Communist Party. I want to thank
Chairman Moolenaar and Ranking Member Krishnamoorthi for
joining myself and Ranking Member Gillibrand for this
incredibly important hearing. The U.S. Senate's Special
Committee on Aging is charged with examining any and all
matters pertaining to the problems and opportunities of older
people.
Our jurisdiction is purposely broad because we want 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 is in that spirit that we come together with our
colleagues from the U.S. House China Select Committee for a
joint hearing focused on the threats that Americans face when
their retirement savings are invested in Communist China. Let's
make something very clear about why we are here today.
The government of China, Communist China, has chosen to be
America's enemy. It is simple. I wish it wasn't true.
Unfortunately, it is. Unfortunately, that is not a problem that
only our military intelligence 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 hard earned savings of America's seniors.
I 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 is what we know.
There is 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. There 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 risk of
investing in Communist China, but as the Chairman of the Senate
Aging Committee, my focus is on our seniors and using today's
hearing, in 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 they may not even know what companies these
investment dollars are being invested in. This is a huge
problem. Too often Washington fails to fix problems, not
because it lacks authority to do so, but because of intentional
or incompetent failure to enforce existing laws and rules.
This is true in every part of government, and it is
dangerously true when it comes to holding foreign companies and
governments accountable. In 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 U.S. 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, but
unfortunately, under the last Administration, the SEC failed to
enforce this law, and today many Chinese companies, including
Yum China, Alibaba, and Baidu are still listed on American
exchanges in clear violation of U.S. law.
This is a perfect example of why your money is not safe
when investing companies tied to Communist China. I plan on
holding the SEC accountable to enforce the law, and I hope to
work with Chairman Moolenaar, Ranking Member Gillibrand, and
Ranking Member Krishnamoorthi to make sure laws intended to
protect Americans from threats posed by Communist China are
fully enforced.
We are also fighting to fill gaps in current law and
strengthen U.S. enforcement authority with multiple pieces of
legislation that will hold Communist China accountable. These
bills will take the necessary steps to secure markets, protect
consumers, demand transparency and accountability, and ensure
investors, especially seniors who are the most vulnerable, are
protected. We need to stop putting Americans' retirement at
risk with investments in the corrupt businesses and practices
of Communist China.
I believe the new Chairman of the SEC will--and I know he
is committed to me that he is going to enforce this act. Stop
putting Americans' retirements at risk due to their
involvement. We are propping up the agenda of the CCP.
Americans work way too hard to have their financial
security destroyed by Communist China. Today, we are 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 would now like to
recognize Chairman Moolenaar for his opening statement.
OPENING STATEMENT OF JOHN R. MOOLENAAR, CHAIRMAN,
COMMITTEE ON THE CHINESE COMMUNIST PARTY
Chairman Moolenaar. Thank you, Chairman Scott, and thank
you for hosting us today. I just appreciate all the colleagues
from the House and the Senate for being part of this. This is a
unique hearing, not only because it is bi-cameral, but because
it reflects growing momentum in Congress to confront the
growing risks 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 are inseparable. For decades, the United States has led
the world in innovation and investment, but today that
leadership is being challenged, not just by market forces, but
by a foreign adversary, the Chinese Communist Party.
The CCP is actively using its financial system and state
controlled companies to infiltrate American capital markets,
and while some might see that as just another investment risk,
it is much more than that.
We have already seen the damage. In 2021, the CCP abruptly
imposed sweeping regulations on China's private education
sector, banning profit making, foreign capital, and public
listings. That decision wiped out billions of dollars in U.S.
investments almost overnight, devastating major companies like
TAL Education and New Oriental. It was a wakeup call, not just
for what can happen in a single sector, but for the broader
reality that when the CCP maintains ultimate control, no
company is truly independent.
I look forward to the hearing from today from the witnesses
on how the CCP control creates systemic risk for U.S. investors
regardless of industry. Mr. O'Leary has pointed out something
in his written testimony equally concerning, the golden share
the CCP holds in many Chinese companies. On 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.
The TikTok Bill, for example, was crafted to require full
divestiture of CCP control because anything less would leave
the door open to the same risks.
We have seen this at play time and time again. Congress has
acted before to safeguard American investors through the Public
Company Accounting Oversight Board and the Holding Foreign
Companies Accountability Act, but the reality is this, the CCPs
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.
The question becomes this, what more can Congress do to
protect U.S. investors from companies effectively controlled by
a hostile regime? That is what today is about. We will hear
from experts who understand how the CCP uses its influence to
mask risk, suppress transparency, and undermine shareholder
rights, and we will look at what happens when American money
flows into companies tied to surveillance, censorship, military
buildup, even human trafficking.
Americans deserve to know whether their capital is being
used to fuel the very threats we are trying to guard against,
and they trust us to take action to keep their investments
safe. This hearing isn't just the end of the conversation, it
is just the beginning. Thank you, Mr. Chairman, and I look
forward to today's discussion.
The Chairman. Thank you, Chairman Moolenaar. Now I would
like to recognize Ranking Member Gillibrand for her opening
statement.
OPENING STATEMENT OF SENATOR KIRSTEN E. GILLIBRAND,
RANKING MEMBER, SPECIAL COMMITTEE ON AGING
Senator Gillibrand. Thank you, Chairman. It is a delight to
be here. Thank you to our witnesses. This 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 am grateful you are here, and I
am sure all of us have been hearing from our seniors quite a
bit.
This has been a very tough time for seniors. The stock
market's ups and downs, losing over $1 trillion of wealth over
the last few weeks. It is very, anxiety provoking for so many
seniors. They 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 are on hold for
five hours. Multiple stories. Problems with getting online
access. Just the list of worries goes on, but the one issue
that has provoked and upset and concerned my seniors the most
over the many, many years that I have been on this Committee is
these online scams. The 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 are soft targets. They
know that they are worth trillions of dollars, and if they can
get underneath their skin, if they can get them to click on the
right button, if they can get them to open a certain piece of
mail, if they can get them on the phone and pretend they are
their grandchild, they will be able to steal thousands and
thousands of dollars.
The PRC, there is 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. I am so grateful that we have bipartisan, bicameral
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 billion, b with a
b, billion with a b in scam related losses for individuals 60
and over in 2023 alone, so we must understand the scope of this
problem, and when I have 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 criminal networks.
They need resources, they need support. They need far more
help. We know that these PRC organized crime networks are
operating in Southeast Asia, they are operating in countries
around the globe, and they are able to create massive scams.
One of the ones that, Mr. Krishnamoorthi and I were talking
about was--I didn't ever hear this term, the pig butchering
scam.
They are looking at our seniors like animals that they are
fattening for slaughter. They 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.
The GAO just issued a report. We asked for this report on--
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.
I want to thank the Republicans and Democrats from the
House and Senate for being here and shining a light on this
outrage that is 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.
The Chairman. Thank you Ranking Member Gillibrand. Now, we
would like to hear from Ranking Member Krishnamoorthi.
OPENING STATEMENT OF RAJA KRISHNAMOORTHI,
RANKING MEMBER, COMMITTEE ON THE
CHINESE COMMUNIST PARTY
Representative Krishnamoorthi. Thank you, Chair Scott,
thank you, Chair Moolenaar, thank you, Ranking Member
Gillibrand, for convening us today. I would like to address
three things. First, a scamming practice called pig butchering,
which Senator Gillibrand just referenced. Second, the impact of
China backed organized crime syndicates' scams on older
Americans, and third, China's culpability in these scams.
First, pig butchering. 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.
Once 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. If you look at the video
from just outside my district of a woman who lost almost one
million to a scammer using pig butchering.
Now my second point, this is not just a financial issue. It
is a human rights issue and a national security concern.
According to the U.S. Institute of Peace, cyber scamming in
Southeast Asia, mainly Burma and Cambodia, is driven by Chinese
gangs and generates almost $44 billion annually.
Weak law enforcement and corruption in this region have
also allowed gangs to traffic people from 70 countries,
including Americans, into this illegal scamming industry. As
USIP has pointed out, the scamming industry is so vast and so
lucrative that it now parallels fentanyl as one of the top
threats posed by Chinese criminal networks to the United
States.
My staff actually received a scam text this week, I am not
joking, which we can see here, and it starts with a simple
hello. Many of us just delete or not respond when we get texts
like this one. In 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 are welcome. You 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 seven 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. It is
dangerous scams like these that are preying on older Americans.
Third, and my final point, there is more to the story than just
Chinese gangs operating in the shadows. These groups, these
gangs directly tied to the Chinese Communist Party.
This is Wan Kuok-koi, AKA broken tooth, a Chinese
businessman, or more accurately a mafia boss, who is behind a
scam compound tied to the CCP. Broken tooth's public motto is,
"I used to fight for the triads and now I fight for the
Communist Party." Another gentleman behind another scam city
seen here with a Burmese warlord is She Zhijiang. 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.
China now seems to be taking some steps to reckon with this
issue, but it is too little, too late. Like the fentanyl issue,
the CCP turned a blind eye and has allowed this to happen. The
CCP must recognize its role in allowing gang 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 back.
The Chairman. Thank you, Ranking Member. Now, I would like
to welcome our witnesses here today. Before I introduce our
first witness, I would like to ask each of you to be mindful of
our limited time together today and keep opening statements to
five minutes. First, I would like to welcome Kevin O'Leary.
Mr. O'Leary is also known as Mr. Wonderful. He is 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. O'Leary 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 am proud that he now
calls the Sunshine State his home. Mr. O'Leary, thank you for
being here today. You may begin your testimony.
STATEMENT OF KEVIN O'LEARY, CHAIRMAN AND CEO, O'LEARY VENTURES,
MIAMI, FLORIDA
Mr. O'Leary. Chairman Scott, Moolenaar, Ranking Members
Gillibrand and Krishna--I am going to get this right--
Krishnamoorthi, members of the Senate Special Committee on
Aging, and the House Select Committee on the Chinese Communist
Party, thank 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, everyone that invests in the stock market,
anyone that invests in passive investment vehicles like
international index funds or mutual funds, any retail investor
that invests in 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 is their government I take issue with.
In my opinion, since joining the WTO in 2000, the Chinese
government has never played by its rules. This has led to the
CCP to passing various laws in the realm of cybersecurity,
espionage, intelligence, and beyond, and other mechanisms to
control its corporations, industries, and business
partnerships, all to the detriment of U.S. investors.
This is not a new phenomenon. It has been part of the long
game China has been playing for decades. Let me just elaborate
briefly on a few reasons why the time for us to address this
matter is today. 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 one percent share in the
company, the government is granted a seat on the board, voting
power and influence over all business decisions. It is
effectively a super voting right. This is the golden share that
Xi is using today to control the potential sale of TikTok. If
China maintaining control of companies wasn't bad enough for
investors, China prevents foreigners from owning Chinese
companies.
Instead, they are cleverly exploiting the U.S. financial
system creation of variable interest entities, VIEs, to
approximate the ownership of corporate shares. If you own stock
in a company like Tencent, Alibaba, or ICBC, you don't actually
own stock in a company. You own a share of a contract of
something in the Cayman Islands that is trying to approximate
stock ownership.
The U.S. has given China preferential treatment for over a
decade through its own special memorandum of understanding that
governs accounting standards and oversight. This sweetheart
deal with the Public Accounting Oversight Board, the PCAOB, has
allowed China to continue to game the U.S. financial system via
their special treatment that is not afforded to other
countries--even our allies.
This is a completely unbalanced and non-reciprocal
situation, and why do we allow this? How can this be viewed in
any way as fair to American investors? There should be complete
parity between the U.S. and China. I 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 U.S.
Unless businesses can operate in China with the same
freedoms that Chinese businesses have here, we should not let
their businesses operate in the U.S. We should exit China's
marketplace until the CCP makes significant reforms. We should
demand that all Chinese companies engage in U.S. markets,
comply with U.S. accounting standards. For 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 and so do millions of
other investors and companies, but we want a reciprocal
ecosystem in place that is transparent where all parties play
by the rules mutually agreed upon. I want access to the Chinese
legal system, so trade and IP grievances can be litigated and
resolved. The Chinese enjoy these rights in the U.S. Why do we
not have them in China?
Lately, there has been a lot of rhetoric about--during
negotiations globally, on who "holds the cards." The U.S. is
still the world's largest markets, 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 is a lot of leverage. Let's fix this Chinese problem
while we still hold the cards. I look forward to a robust
conversation today and answering any questions you may have.
Thank you.
The Chairman. Thank you, Mr. O'Leary. Now I would like to
welcome Christopher Iacovella. He is the President and CEO of
the American Securities Association.
He serves as the leading voice for financial services
policy. He has worked as Special Counsel and Policy Advisor to
Commissioner Scott Malia at the U.S. Commodity Futures Trade
Commission. Thank you for being here, and I look forward to
hearing your testimony.
STATEMENT OF CHRISTOPHER IACOVELLA, PRESIDENT
AND CEO, AMERICAN SECURITIES
ASSOCIATION, TAMPA, FLORIDA
Mr. Iacovella. Thank you. I am grateful to the Chairs,
Ranking Members, and members of each committee for the
opportunity to testify today. My name is Christopher Iacovella
and I am the President and CEO of the American Securities
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 to communist China would liberalize its political and
economic systems, that is not what happened. In fact, the
opposite occurred. Beijing used the openness of the
international economic system to exert geopolitical leverage
over the U.S. and our allies.
Rather than liberalize, the CCP has been engaged in a
multi-decade, multifaceted political, economic, and military
strategy to achieve "the great rejuvenation of the Chinese
nation." 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. To
implement this strategy, the CCP needed capital, and that is
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 is this quid pro quo 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. Then 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
the mainland Chinese company to list its shares on our
exchanges. American investors have no equity or voting rights
in the shares of the Chinese company and very little legal
protection. We join the Select Committee in 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, so 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 A-shares.
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. As the 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 is 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, and we recommend that an entity placed on
one government list should be placed on all lists and
automatically allow the Treasury Secretary to de-list 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. PLA 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 and 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 have been scammed know that
if they can't get their money back before it goes to China,
then it is gone.
The government and the private sector have an obligation to
work together to stop this avalanche of fraud from continuing
to harm Americans. To conclude, communist China doesn't play by
the rules, and it is 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 is 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 am happy to take your questions.
The Chairman. Thank you. Now I would like to introduce our
next witness, Brady Finta. Mr. Finta is a retired FBI agent,
the Founder of the National Elder Fraud Justice Coordination
Center. Through his work as an FBI agent, Mr. Finta oversaw
cases regarding international scam rings targeting older
Americans. You may begin. Thanks for being here.
STATEMENT OF BRADY FINTA, FOUNDER, NATIONAL ELDER
FRAUD COORDINATION CENTER, SAN DIEGO, CALIFORNIA
Mr. Finta. Good afternoon. As you said, my name is Brady
Finta, the Founder of the National Elder Fraud Coordination
Center, and I am honored to be here. I believe the scale of
fraud against America's elders has grown to epidemic
proportions and it is time that we as a country treat it 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--I
am sorry, transnational organized crime under a different name.
What I was not prepared for was the volume. Just in my
limited territory of San Diego County, I was inundated with
elder fraud complaints without adequate resources to fight the
threat. No one has those level of resources. Even after
standing up the FBI's Elder Justice Task Force alongside the
U.S. 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 were only able to address less
than one percent of the leads.
Based on my experience, I believe only about 10 to 15
percent 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 are incredibly time consuming.
They literally span the globe, combining organized crime groups
in foreign countries with regional organizers, co-conspirators,
and mules in the United States. Laundering the proceeds of the
crime runs the gamut, from cash to gift cards, to wire
transfers, to digital currencies.
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.
In one just very typical case I oversaw, we had scammers in
India working with regional organizers in the Bahamas, mules in
the Dominican Republic and the United States, and Canadian and
Chinese organized criminals laundering the proceeds. The
international natures of these scams make them extremely
difficult for law enforcement and prosecutors alike to hold
those criminals accountable.
It gets more difficult when the country where the crime
ring is based is uncooperative. While I realize this hearing is
intended to focus mainly on China, I would like to emphasize
this is a larger and global issue, and we currently do not have
the resources to properly address it. This threat touches all
of us. I would venture to say everyone in this chamber has a
story of an acquaintance, a coworker, or a family member who
has been victimized. Both of my parents were victims. 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 FTC estimates that
the annual losses to this scourge are approximately $61
billion, and the FBI statistics that show huge increase in
these complaints over the last few years further underscore
that the time is now for a more dramatic response--a whole of
society response. As a country, we have created national task
forces of state, local, and federal agencies to combat illegal
narcotics, gangs, child exploitation, and terrorism.
Our parents and grandparents deserve nothing less. In
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
companies across the United States could create real impact.
This 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 AARP, and Amazon, Google, and
Walmart are dedicated to the idea of pooling these resources
together for this worthy cause.
Our partnership with the National Cyber Forensics Training
Alliance offers the opportunity for hundreds of other companies
to do the same. I thank you for your time and attention on this
important issue, and I look forward to answering your
questions.
The Chairman. All right. Thank you to the witnesses for
being here, and now we will go through--start asking some
questions. Let me start with Mr. O'Leary. Can you explain this
idea that Chinese companies--Americans can buy into or 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 and accounting principles, and our SEC has not
enforced rules--which would require any American company to
comply, but not--for whatever reason, Chinese companies don't
have to. What is the risk to an investor?
Mr. O'Leary. No transparency. Regulations in the U.S., and
the regulatory environment, and the bodies that enforce it have
created the most successful capital markets on Earth. More than
half or almost 60 percent of the world's capital is invested
because of the rules put in place for transparency and
appellate courts and everything that makes these capital
markets work in the United States, and yet somehow--and I am
calling foul as an issuer of securities that is enforced by
these regulations that I abide by for obvious reasons and want
to--I want to be compliant. I also have to bear the escalating
costs each year, which are millions of dollars to be compliant.
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. I mean, there is no consequences.
I understood the law would allow--gave them 36 months for
compliance and then it was adjusted down to 24 months, and
still they are listed, and still, I have to compete with them
to raise capital and they don't even have to pay the compliance
costs. I mean, what is wrong with this picture? How can this
possibly be going on? I am above--I am so excited that finally
this is getting national focus.
This is absolutely outrageous and unfair, and we are
letting them take this capital they raise in these markets, and
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 has got to stop, and they
have to pay the consequences. There 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 is no
way this can go on.
The Chairman. The Security Exchange Commission requires a
company that wants to be stocked to the public to provide
disclosure of anything that is material. On top of that, they
require them to give audited financial statements, right?
Mr. O'Leary. Right.
The Chairman. That is what you have to do, right?
Mr. O'Leary. 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 and the company. Who
would want to invest in a company like that? Do you think I
could raise any money if I disclose that--I have a golden share
in my structure that only I can decide all outcomes on every
single issue. The board is irrelevant.
That is basically what that share is. Could I even compete?
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 is okay and you want
to invest in a company where one individual has a super golden
share, go ahead.
The chances you go to zero are very high because that
person may not have any governance or any momentum or any
consideration of the rest of the shareholders. That is why we
don't allow this here, and that is why we are the most
successful capital market on Earth because if 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 has just
got to stop.
The Chairman. Number one, they are not complying with SEC
rules. Number two, they are not complying with exchange rules,
and number three, anybody that has taken them public, all
right, they can't comply because they can't disclose anything
material because there is not enough information, right?
Mr. O'Leary. Why wouldn't you put consequences on those
that facilitate this? I would love to pour boiling oil over my
competitors that are not being compliant. That is why we have
competitive markets.
I know what the rules are. If I want to do a listing, 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
am competing with companies that go after that same dollar from
the investor that are totally opaque. That is just wrong.
I am happy to come here and scream about it. Happy to do
that. I am happy that we are having this narrative.
The Chairman. Thank you, Mr. O'Leary. Now, I will turn it
over to the Chairman, Moolenaar.
Chairman Moolenaar. Thank you, Mr. Chairman. Mr. O'Leary,
if I could followup with you on some things. You know, we are
here to explore today the risky business of investing in
Chinese companies, and it is an area where you have some
experience as a potential purchaser of TikTok.
TikTok, as you know, is one of the most prominent Chinese
companies on the planet, and when you were putting together
your TikTok bid, what sorts of national security and legal risk
were you most concerned about, and how did those risks affect
the bid that you constructed?
Mr. O'Leary. The truth about TikTok is, and I am aware of
this and many others in the social media industry, and the
software and AI industries know this, TikTok is weapons grade
spyware, period. It is one of the best propaganda machines I
have ever seen.
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 iPhone screwing in screws with the
message, let's Make America Great Again.
I have never seen such blatant propaganda, and that is why
in this situation, this law was written, and it is very
specific. This is before the Supreme Court nine to zero ruling
about redefining what these laws said regarding the algorithm.
What it says is we cannot--if any interested syndicate that
wants to buy this, it cannot use the algorithm. That is the
plain language, and then further defined with higher resolution
on the top paragraphs of page five of the nine page ruling from
the Supreme Court, nine to zero, very definitive, no algorithm.
Now, 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 the definition of
whether this was even possible.
Would you write an indemnification? 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? Because the penalty is $5,000,
per 24 hours, per account.
That is $80 plus billion dollars a quarter. Nobody is going
to do that unless they are indemnified, and I have understood
today from Senator Cotton, that is off the table. Now, we have
clarity. Whoever is going to buy TikTok is not going to buy the
algorithm, period. That is clear, and I think that is great
that you have done that because it makes the competition much--
much more in focus, and do I want TikTok to survive? Yes.
I am an advocate, as you know, for small business in
America. Companies between five and 500 employees. A very
successful platform. Over seven million families make their
living on TikTok. It is the lowest customer acquisition cost
vehicle in America. It is a great competitive product when it
is used properly. I would love to be part of the syndicate that
buys it. There is no question about it.
I am also an advocate for these small businesses because
they create 60 percent of jobs in America. They are the
American economy. I would like to see this product survive.
Happy to play by the rules, 100 percent.
Chairman Moolenaar. Can I just followup with you, you
talked about the golden share, and I would like to hear a
little bit more about that. Relative to TikTok, does Xi Jinping
have a golden share in ByteDance?
Mr. O'Leary. Ask yourself why, when we are talking about
buying TikTok, we are not talking about the shareholders of the
company that own it, called ByteDance. They 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 Xi on TikTok? 100 percent, he has a
golden share.
There is no other way this deal is getting done. I think
that is 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, but I respect it to be a
fact. I know I can't do this deal, or anybody can without his
decision on what the structure is going to be.
The laws currently here allow for the Chinese to own up to
19.9 percent. This is a media company. These laws are already
in place. I am happy to work with this deal, as every syndicate
would be, as long as it is compliant, but does Xi have a golden
share? 100 percent. He alone will decide.
Chairman Moolenaar. Thank you very much, and, with that, I
would like to call on Senator Gillibrand.
Senator Gillibrand. Thank you very much, Mr. Chairman.
Appreciate you very much. For Mr. Finta, during your career as
an FBI agent, you worked on a case that uncovered a
multinational organized fraud ring that targeted elderly
victims in the United States. Your 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 perpetrated by these international criminal
networks?
Mr. Finta. I appreciate the question, Senator. When 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.
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 intelligence.
Now, of course, it is available by subpoena. It is
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.
Senator Gillibrand. Yes.
Mr. Finta. Not enough cases. Not enough agents. Now, if we
got to the point--where we have in other instances. For
example, our JTTF, our Joint Terrorism Task Forces, where
state, local, federal agencies are working together with
representatives from the private sector to share information
into advance these cases to the point where they become
effective, and we can do more of them.
The culmination of this across the country, if we had more
of these task forces, would inform those decisions that we are
trying to make overseas, right. We would have the intelligence
we need with more of those cases, with more of those arrests,
with more of that intelligence. It is definitely within our
grasp.
Senator Gillibrand. You are saying you need more personnel
and more investigative resources? Is that what you are saying?
Mr. Finta. Yes, ma'am. Similar to, again, ICAC, the
Internet Crimes Against Children Task Forces, which are
predominantly staffed with local police departments, where
those local and state resources can be used to support larger
federal and international investigations. The effect of that is
much greater than the individual investigations in local----
Senator Gillibrand. You are saying you want to deputize
local law enforcement to help?
Mr. Finta. Absolutely. If there was an EJTF, an Elder
Justice Task Force----
Senator Gillibrand. A what? Say it again.
Mr. Finta. I am sorry, EJTF, Elder Justice Task Force----
Senator Gillibrand. Yes.
Mr. Finta. In every major city in the United States
similar----
Senator Gillibrand. That allows you to deputize local law
enforcement?
Mr. Finta. Absolutely.
Senator Gillibrand. I will work on that with you. What
about tech? Do you have the appropriate technology? A lot of
these scammers rely on voice recognition systems. They do 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 are very sophisticated. Do
you have the tech you need? Do you need a technology support?
Mr. Finta. Again, I will remind the chamber that I am
retired from the FBI, and the FBI does grow and change every
single day, but it is the government, and that is why I think
it is so important for that relationship and partnership with
the private sector to bring cutting edge current tech from
those companies in--on this fight.
I think it is a good option that would replace huge
results. If we brought tech companies, banks, retailers, and
telecoms together, stacking that sort of evidence and
intelligence would create an avalanche of positive cases and
intelligence.
Senator Gillibrand. Mr. Iacovella, what steps should
Congress take to address continued investments by PRC companies
by state and local pension funds? Are there any scenarios where
the fiduciary duty owed to the pension funds may conflict with
the national security concerns at a federal level?
Mr. Iacovella. I think Congress should take steps to ban
PRC investments. I think that the fiduciary duty that is 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 state secret or a national security privilege when
you try to do an audit, so that is why I think they should be
banned.
Senator Gillibrand. Thank you. Thank you, Mr. Chairman.
Chairman Moolenaar. Thank you, Ranking Member Gillibrand.
Ranking Member Krishnamoorthi.
Representative Krishnamoorthi. 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 engaged in fraud
and criminal acts, right?
Mr. Finta. Yes, I believe that is true.
Representative Krishnamoorthi. 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?
Mr. Finta. Absolutely.
Representative Krishnamoorthi. 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. It 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. Mr. Finta, as you
can see behind me, you can buy packages of hundreds of these
photos for just %80 yuan, which is about $11, right, on the
Chinese internet?
Mr. Finta. Yes, sir.
Representative Krishnamoorthi. Using these fake personas,
Chinese cyber gangs then target older adults and convince them
to drain their savings. The CCP says they can't go after the
scammers themselves since supposedly the scammers are seeking
refuge in Southeast Asia, but Mr. Finta, websites like these
where scammers sell photos of unsuspecting young women are
Chinese websites.
Mr. Finta. 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 exploitation.
Representative Krishnamoorthi. The CCP could, with a flip
of a switch, take these down, right?
Mr. Finta. I don't know the--I don't know the technical
side behind that, sir, but I, think they have great capacity to
impact that.
Representative Krishnamoorthi. The CCP could stop this, but
they are not, and through their inaction, they are complicit in
the bankruptcy of countless older Americans, right?
Mr. Finta. I don't disagree with that, sir.
Representative Krishnamoorthi. Now, I would like to turn to
my last topic. I want to turn your attention to a surprise
guest witness, Daisy, who I mentioned in the opening. I had the
chance to actually video chat with her yesterday, and she even
gave me a compliment. Can you play the video?
[Video clip playing.]
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. I said, how much do you want me to invest in gold?
[Video clip playing.]
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. I then asked plainly, is
anyone making you do this? Her response was not pretty.
[Video clip playing.]
We then gave up the jig and I asked her if this was a scam,
but it did not end well.
[Video clip playing.]
What is 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?
Mr. Finta. I couldn't agree more, and honestly, if we
worked together as a country and we put all those resources in
one basket, we would have a lot more effect at making that
happen.
Representative Krishnamoorthi. Right. It is like we, we got
to protect our folks, our seniors, but at the same time, if we
could stop the flow of this human trafficking, the people who
are working at these scam factories would also be effectively
shutting down the scams. 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.
Chairman Moolenaar. Thank you. Chairman recognizes
Representative LaHood.
Representative LaHood. Well, thank you, Mr. Chairman. I
want to thank my Senate colleagues for welcoming us. I actually
just came over here because I wanted to try the U.S. Senate
water. We appreciate you having us here as House members.
Thanks to our witnesses for, your testimony here today on this
very important topic.
I will just state at the outset here, America's global
innovation leadership matters, and Chinese leaders 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 have talked a lot in this Committee, the Select
Committee on China. China has a plan to replace the United
States, and they are working at it every single day. They want
to beat us technologically, militarily, economically, and
diplomatically, and the sooner we wake up to that, the better,
and, as we think--unlike our democracy, the CCP can dictate an
arbitrarily direct industrial policy as it relates to funding
toward technologies they believe are most important.
We have seen that with CCP 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 U.S
investments and intellectual property. We have heard a lot
about that in our Committee hearings.
To develop Chinese domestic military and intelligence
capabilities that undermine U.S. national security. New
restrictions on access to U.S. 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 are
looking at. The U.S. must continue to create new tools to curb
U.S. investment in CCP high tech sectors and prevent U.S.
capital from being used to embolden the CCP's military.
I will start with you, Mr. O'Leary. We have heard from a
couple of the witness--a couple of our members today on the,
CCP's use of golden shares as a vehicle, but it also seems to
be a vehicle for party control inside private companies.
From your vantage point, are there any private companies in
China that have the ability to refuse a request from the CCP
over business decisions under this structure?
Mr. O'Leary. I am sure they have the right to do that, and
then you don't hear from them anymore. That is what I think
happens. It is sort of a Jack Moss situation. I mean, you got
to tow the party line. I think those are the rules. That is how
it works.
He was an extraordinarily successful entrepreneur and then
he disappeared for a while. I think that is how it works. I
think if you refuse to cooperate with the golden share
participation--remember, they are selling down to one percent
with effective super rights with that one percent.
I am not sure you can go to your counsel in China and say,
look, I would like to object to this and litigate this in
court. In fact, I am sure you can't do that. That is what you
would do here. If the government said to me, you are going to
sell--you know, we are going to sell our complete holdings and
we are going to keep one percent and we are going to tell you
what to do every day in one of my public companies, I would
say, sure, let's go to court.
That is why people invest here because there is an
appellate system on a check and balance for crazy ideas like
that, so my answer would be, there is no difference in China
between a public company or a private one. There is just a
golden share. That is it.
Representative LaHood. Thank you for that. Mr. Iacovella,
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 U.S.
in spending within the decade. How can we as policymakers
support the development and fostering of innovation and bolster
America's leadership position in this international
competition?
Mr. Iacovella. Well, 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 is what my big concern is and what 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, but for some reason, they continue
to be able to take American investor money and fund their rise.
It is like a whack-a-mole scene where we put one on an
index list, they create a subsidiary, and then that subsidiary
starts to get money in our capital markets, and that is why
whatever Congress does, it has to be very crystal clear on the
prohibition.
Representative LaHood. Thank you for that. I yield back,
Senator.
Senator Husted. Thank you. Thanks for being here today. I
am John Husted. I am Senator from Ohio, and I wanted to talk a
little bit about AI. I know that Senator Rosen and I have a
bill that would prohibit DeepSeek from being on any federal
devices.
I have, you know, grown concerned about how, you know, we
talk about the scams with seniors and certainly foreign
adversaries like China are exploiting our freedoms. We allow
these technologies to freely flow inside of America while they
prohibit those same kinds of technologies from being available
to their population. Mr. O'Leary, I will just--I know you have
a lot of experience in looking at these investments in China
and abroad.
Do you have any thoughts on AI, particularly DeepSeek or
anything in that space? How our freedoms--how they are--how
Chinese government and Chinese businesses are perhaps
exploiting our freedoms and what threats AI pose in that space,
particularly for our seniors and scams that could be
perpetrated in America?
Mr. O'Leary. Yes, that is a good point. You know, this
issue around AI competition--it is my belief that the country
that advances AI the fastest and with the most capacity, is the
safest from a defense point of view.
I don't care where warfare goes in terms of technology, it
is going to be driven by AI. Predictive outcomes in a war
scenario. If I were China, I would want to be the most advanced
and as fast as I could in AI just to prepare for warfare in the
future. That is what we should be really concerning ourselves
with. Do we have the most advanced AI? 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 overweight
Americans at sewing machines. That Is all AI driven. The
challenge we have, and it is almost worth its own
investigation, is the country with the most power wins AI
because you have to build giga sized data centers. Right now,
in America, we have a demand for 45 gigs--5 gigs are under
construction.
What holds us back in North America, Mexico and Canada,
included, is permits and power. If you go to any authority
here, any state, and ask for a gig of power, you can't get it.
It is just not available.
Our grid is maxed out, and China has solved this problem
with coal powered electrical plants that are generating a
tremendous amount of electricity. They don't have a problem
with permitting. The government finds the land, they build the
facilities, and they power it with over 1.4 gig of power.
One of the reasons they were able to advance DeepSeek so
quickly was they got the power to do it, and you have heard
lots of warnings about this, but AI should be earmarked as
number the one issue for defense. That is 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 future.
Senator Husted. Well, that is--I think that is a really
good point, and if you study the history of the world, the
nations that are the most military and economically dominant
are nations that are the most innovative.
New technologies from the beginning of time have advanced
as military weapons that allowed for nations to conquer or be
conquered. It certainly creates that same opportunity from an
economic point of view, because look, militaries are built
through the revenue and the growth of a country--of a nation's
economy.
Mr. O'Leary. The tech.
Senator Husted. The tech is financed from that economic
dominance, so economic dominance begets military dominance.
Military dominance traditionally has been helpful at economic
dominance and conquest and setting the rules of the game for
global competition. The other two gentlemen who are with us
today, you have any thoughts on that--those particular issues?
Mr. Iacovella. I think that we could go back to exactly
what Kevin was talking about in the beginning, and what I have
tried to talk about, which is the playing field is not equal.
Our companies are playing on an un-leveled playing field to
access the capital.
Over there, it is going into China, and it is--it may never
come back. Xi makes one decision and then that is all gone, and
we don't know how deep and how far the investment ecosystem is
in private equity, in pensions.
It is in mutual funds. Any of these that hold Chinese
companies can go to zero tomorrow if Xi decides to do, and I
think that is what the scariest thing is from my perspective.
Senator Husted. Okay. I am out of time, but I will say to
this point, these technologies in a free society that are
yielded by our adversaries and people within those nations who
will not police the rule of law can be weaponized against our
citizens, and in this particular case our elderly citizens in
this Nation, and we got to wake up to it, and I appreciate your
thoughts. Chair recognizes Representative Caster.
Representative Castor. Thank you, Mr. Chairman. Thank you
to the witnesses for being here. I want to apologize if I have
been squirming in my seat. I am--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 by the White House and the President over the past few weeks
regarding imports, the import taxes, and just the sheer chaos
of not knowing what is coming next.
To the subject of this hearing, that kind of chaos empowers
the Chinese Communist Party. That emboldens them to continue
their malign economic abuse of our seniors in this country, but
our businesses, our allies, our friends.
The Chinese Communist Party, they know that these
fraudsters and sophisticated scammers target older Americans to
steal their hard earned cash. Especially poignant in a state
like Florida where 20 percent of the population, over 65. In
the latest report to Congress regarding the protection of older
adults, the Federal Trade Commission stated that older adults
reported losing more than $1.9 billion to fraud in 2023.
That is just the cost of the reported cases. The vast
majority of frauds are not even reported. I heard you, Mr.
Finta, talk about your mother, your parents. I hear these same
stories from my mother and her friends. They just feel like
they are over the barrel. That they are being preyed upon.
They are not exactly sure what is coming at them next. They
want help. The problem is that the White House now, not just
causing this economic turmoil and uncertainty, they are also
going after the cops on the beat, 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, and it gets more complex all the time, so to
divert resources from a Federal Trade Commission that has grown
expertise over time to tackle these kinds of abuses, it just
doesn't make any sense.
Here is a glaring, flashing warning light right now. Not
just the economic turmoil caused by the President, but what he
is doing and the fact that Republicans and Congress are not
standing up to keep the cops on the beat at the Federal Trade
Commission. We are talking about they are investigators, they
are enforcers, and the President even went so far as to attempt
to fire Commissioners from the--just the Democratic
Commissioners of the FTC.
Now, here is the problem. Congress in a bipartisan way a
few years ago established the FTC as an independent, bipartisan
enforcement agency. They have a long history of defending
consumers, so 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
are just hamstringing our own selves--our ability to counter
the CCP in all of their malign efforts.
Mr. Finta, you, in your testimony, you said, in your
exchange with Senator Gillibrand, you said we need to double
down. We need to recommit through the Department of Justice,
and wouldn't that include the Federal Trade Commission too
where we have experts on--that are ready to go on task and work
to counter the Chinese Communist Party and the fraudsters?
Mr. Finta. 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. I will say that
historically with each agency, regardless of cutbacks and
changes in different Administrations, working independently, we
continue to lose.
The problem keeps getting worse year, after year, after
year. I 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 an effective or impactful
level in the past.
Representative Castor. I agree with you, and I salute you.
Thank you to our witnesses for being here and helping us to
call out these scammers, these fraudsters. We all have to
recommit and definitely not take the cops off the beat and
create economic turmoil that pushes people into the arms of the
Chinese Communist Party. I yield back.
Senator Moody. Thank you. I know it is probably a little
bit confusing with folks running to vote and get back--getting
back here to hearing, and also, who is chairing the Committee.
I am proudly taking over chairing the Committee. I am
Senator Ashley Moody from the Tampa Bay area in Florida. Like
my House colleague, who also represents the Tampa Bay area, it
is 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. There is no doubt
that these--some of these are emanating from China.
What 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.
In fact, I just 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.
It has just--it has happened in the State of Florida, and
it should be no surprise, if anybody was following it, that
China passed laws just before the Biden Administration. The
first one was all Chinese nationals had to cooperate with
matters of national security, and if you were a Chinese
national, you had to participate with intelligence gathering or
face consequences.
Why we are issuing visas to Chinese nationals that are
coming over here makes no sense. We are inviting agents of the
CCP into our country when they are obligated by law to gather
intelligence. That seems a simple step to me--something we can
do as leaders, and what I have been fascinated with and
appreciate is your testimony and your experience in identifying
ways that China is acting that is undermining America's
interest.
That is why I am so grateful for President Trump and
putting America first, and part of that lies in, Mr. O'Leary, 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 have had experience
with that. You have been gracious enough to give time and talk
to other Senators about that.
Again, we have discovered things over time, and I will go
back to, we caught them setting up police stations in our own
country, right. We have 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
reveal these very directed, specific targeting of undermining
American interest.
I will turn my first question to Mr. O'Leary. 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 cannot be trusted as long as we are willing
to tolerate the totalitarian regime in Beijing?
Mr. O'Leary. Well, step one, which I think is going to be
the easiest path of least resistance is to simply enforce
existing laws, particularly in capital markets where those of
us that are compliant have to compete with entities that are
not.
If you have a golden share or if you haven't produced GAAP
statements that are transparent over the last 24 months, you
are going to get delisted, and that is going to be billions of
dollars getting evaporated off our exchanges, and that I think
is a wakeup call to China, which really, if you think about it,
wants to become the eighth member of the G-7.
The G-8. If they want to play with the big boys, they are
going to have to play by the rules. Everything stems from
capital. You can't build an economy all on your own. You have
to get access to capital, and we have provided an amazing
platform for China to tap into the world's greatest economy,
from a consumer basis where they can sell their products, and
also the rule of law to raise capital.
That has not been fair. It has not been a leveled 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 have got nothing against
Chinese consumers. 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.
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. Nobody has
said, okay, you are not complying, and all they have been
taught from us is there is 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 am only asking as one voice, when is this going to change? I
mean, when? Because if it doesn't change now, they are 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 is advanced,
and you reverse engineer it, I will show you American code from
some decades, as many as 40 years ago. I swear to you, I
believe that.
We never did anything about it then and we are not doing
anything about it now. We are here to say it has got to stop.
We are the guys in the front line. We are dealing with this.
You have heard my colleagues talk about this. It is just not
fair, and I am 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 is what is going to happen. You can't
cutoff people from the United States market, the largest on
Earth capital market, without a consequence.
Senator Moody. Well, we appreciate you certainly being here
and being a part of this process where we are calling it out,
and conducting a Senate hearing, a joint House and Senate
hearing is certainly part of that, and 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, from the
opioid crisis, to how do we confront the most pressing issues
facing our seniors.
I want to thank you, Chairman. I also want to thank you for
coming back so that I can pass the gavel right back to you.
Appreciate it, Mr. O'Leary.
The Chairman. Thank you, Senator. Yes, we have got a lot of
votes this afternoon, so I have to go back and forth for votes.
Senator Kim.
Senator Kim. Yes. Thank you, Chairman. Mr. Finta, I wanted
to start with you. As I was preparing for this hearing, 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, yes,
we don't know the full extent and scope of what we are dealing
with.
I thought, in fact, your testimony, I thought approached
this with a sense of humility. You said, I believe only 10 to
15 percent of elder fraud victims ever report the crimes
against them.
I guess I just wanted to start, based off of your
experience, are there any best practices that you have seen or
are there certain types of steps that we should be taking to
make it easier for the reporting or try to have a better
handle, try to do better, encourage people to come forward, but
also, you know, making sure that we know what we are actually
dealing with?
Mr. Finta. Absolutely. Thank you for that question to--it
is a great opportunity to talk about what should be as opposed
to what is right now. Unfortunately, right now in the United
States, the reporting is remarkably low.
One of the other kind of consequences of the crime itself
is that a lot of our seniors would prefer to report to their
local police departments. 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 the victim of a pop-up ad on the
internet where I went to a digital currency ATM and sent money
overseas.
Unfortunately, the vast majority of the time, what you are
going to immediately get is, hey, I am sorry, there is nothing
we can do.
Senator Kim. Yes.
Mr. Finta. You should call the FBI, or you should, you
know, file a claim with IC3. When you call the FBI as an
individual, or HSI, or you file a claim with the Internet Crime
Complaint Center, you are viewed essentially as an individual
who lost $30,000. It could be your life savings.
Unfortunately, there is hundreds and thousands of those
complaints, and without a real combined effort to aggregate,
really analyze, and work the most pressing complaints. Again,
with our private industry partners, we are pushing a giant rock
uphill as law enforcement, and it does not encourage people to
do those reports when they don't see the effects of them,
right.
When you file a complaint and that complaint does not get
worked, you are not called to testify at a sentencing hearing.
You don't get that.
Senator Kim. Yes. Well, you know, even and you said here in
the followup sentence, even with this low percentage of volume,
complaints are still far too large to investigate under current
circumstances, as you were saying. I guess I wanted to just
ask, are we thinking about it in the right model here?
You know, I wanted to--I was about to ask you like, how
much more do we have to surge resources toward this. You know,
this is Sisyphean effort though, in terms of just, you know,
constantly feeling like we are never actually going to scratch
what is actually there.
I guess I wanted to ask you, 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 toward?
Mr. Finta. No. I believe with any large problem, there has
to be multiple approaches to combat it. This is just one of
them in terms of actual investigation enforcement. I do believe
that 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.
It is effective as a model if you proliferate that across
the country. The combined results of 50--100 EJTFs around the
country would start to have a disincentive effect on those
groups overseas and the people here facilitating those crimes.
Senator Kim. I see, so you are saying if you can replicate
that type of structure 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 be rest within the FBI
or is that something at the Federal Government level to try to
coordinate across?
Mr. Finta. Well, that is a good question and that is
outside of my lane in terms of speaking for other agencies. I
do think, again, with, for example, National Elder Fraud
Coordination Center, to aggregate the data from U.S. companies
who do have amazing resources to support those types of
investigations would be a game changer.
Senator Kim. Yes. Okay. Thank you. I am out of time, so I
will yield back to the Chair.
The Chairman. Thank you, Senator Kim. Senator Justice.
Senator Justice. Well, first of all, thank you for all
three of you coming and your testimony. I didn't get to chance
to hear it, and so--you know, we have been running back and
forth doing all these votes and everything, but I have got to
just tell you just this. You know, for one of you, Kevin, we
have become real friends and what an incredible man this man
is.
You know, I have had him in my office in Charleston, West
Virginia in the Governor's office, and I had the opportunity to
be the Governor of the State of West Virginia for eight years.
I can tell you that I can speak very frankly and say, I don't
know that anybody has been in that office that has been more
credible than this man. I appreciate our friendship.
He has done every single thing that he said he would do,
even to the point in time when he called West Virginia a winner
state. I would say just this, if West Virginia is a winner
state, and I love, I love the contest of ball games and
everything, but absolutely, we can't possibly say we are
winning, we are absolutely winning when it comes to China. I
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 am not stepping out of my
bounds and everything, but he came in November of last year. We
were sitting, you know, in a location in Fairmont, West
Virginia. He said, we are going to make this a go. We are going
to make it a go now. I think they are scheduled for June, from
November to June, and absolutely they are pulling it off. Like
I said, as far as credibility, he has not only my vote, but
many, many, many in this great--in the great State of West
Virginia.
With all that being said, you know, Kevin, as your friend,
I would just ask just this because we have 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.
You know, Kevin, just a minute ago said just that. We know
about it. For God's sakes of living, this can't be that hard.
You know, we know about it, and we don't do anything about it.
Well, I really don't get it. Like I said, I am a new kid on the
block here, but I am a kid that abounds in common sense and
logic, and goodness, and truth.
I have got just one question, and it is 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.
What 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
have probably already given us a whole bunch of advice already,
but I didn't have the liberty to be able to be here to hear it,
but please tell us more wisdom.
Mr. O'Leary. Well, I just feel that if the initiative and
the incentive from these hearings and with other members is to
enforce existing laws as they stand, we will end up in a much
better place in terms of our relationship with China, because
they are a large economy. We are larger.
There is a chance to work all this out. I might add that
while we have been sitting here, my phone has been lighting up,
the market is up 3,000 points because what is 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 maybe we end up with zero tariffs. I
don't know.
China is not the same. It is not the same. We have to
resolve the issues we have been talking about here today as
part of the negotiation. I don't care if we get to 400 percent
tariffs on China. The 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, this is changing by the hour, but
now I am 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. All of us that are involved in dealing
with this and competing with it, applaud it, I can assure you.
I am the voice of millions on this that have been doing
business there.
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, and that is pure
gold for AI. Now, I can speak to you as, you know, in working
with your government.
You moved permits quickly for that Prime six plant you
spoke of and that is why it is 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 were not allowing gas turbines to
work in conjunction with diesel backup generation, and so, the
sites in West Virginia have become prime real estate now for
AI.
You are going to--you will transform your state's economy
by embracing energy because we don't have enough in America,
and there is--you have Senators there and you have--there is
lots of other people in your government in West Virginia that
understand this opportunity is huge. It is absolutely huge.
Demand is insatiable. You got to tap that and move at the
same speed you did--and I am just one investor in West
Virginia. It was a winner state because you got stuff done and
everybody has to hear that message.
Senator Justice. All right, thank you so much, and thank
all of you. Thank all of you for being here today.
The Chairman. Mr. O'Leary, what if there was a company
called WeatherTech, you know, and they produce really nice mats
for the car.
Mr. O'Leary.. I have them in my F-150. The Chairman.They
woke up one day and they looked on Alibaba and they saw that
their products were being sold on Alibaba. They looked at their
shipping and they, you know, they have never had done any
business with Alibaba. They looked just like the mats that they
produced in Illinois but--and they even had their name on it,
right. What could they do to stop this theft of their product,
and they got nothing for it. What would be their recourse right
now?
Mr. O'Leary.. There is nothing they can do. You have just
told the story of a million small businesses in America over
the last 20 years. They innovate. They create. They are
entrepreneurs. They prove their product to the Americans'
consumer market. At around $5 million in sales, they are
knocked off.
By whom? China. Very often the same plants that ran the
molds under a relationship they had with the company--a lot of
companies went to China 20 years ago, 10 years ago, and put
their molds there, and during the day, the company would run
the WeatherTech mat in this example here, theoretically, and
then at night they would run the knockoff mat, and they would
bring it into the market, and let me guess, 30 percent off
retail of the WeatherTech.
I have seen this happen countless times, and in some cases
where the company is very small, they go out of business, and
nobody hears that tree falling in the forest. It happens
thousands of times. There is 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
resolve the complaint through litigation as we do here.
My recommendation is, look, if you are a Chinese company
and you want to use our courts to litigate your complaint?
Sorry, not until you open yours. We would love to work with
you, but unless it is a reciprocal--the whole idea of today's
conversation was just to get to a reciprocal playing field--an
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 is not the case in China. I
mean, we are all saying the same thing here. It has got to get
fixed, and finally, finally, here we are with tariffs being the
excuse, but now I think Xi has to come to the table and I hope
it happens, and I would like to see tomorrow morning 400
percent tariffs.
The Chairman. Let's say there is 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 get money out of Alibaba right here?
Mr. O'Leary. No. They can try. Sometimes if it is a big
enough case, they will take it down. Amazon is much better if
you can prove that you own the IP and you know----
The Chairman. They couldn't get any damages out of
Alibaba----
Mr. O'Leary. I have never heard of a case resolved to the
satisfaction of the company that is making the complaint, ever.
Now, there may be a case I don't know of, but the WTO is
supposed to provide this platform. You find me one year since
2020 where there haven't been a plethora of complaints exactly
like the one you have just detailed and there has been no
consequences. None. Zero.
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 have made themselves based on
American IP.
Look, it has got to stop. I mean--and I am sure most
Chinese people would love to compete. There is great Chinese
entrepreneurs. They don't need to cheat and steal. They can--we
just need a level playing field.
I would love to see this resolved and I hope it happens,
but I say, and what I have learned and what I have seen in my
long career, is China understands only one thing, the stick.
Give them the stick. They respond to the stick.
The Chairman. Hopefully today we will confirm a new
chairman to the Securities Exchange Commission, so what would
you ask him to do? 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 to disclose all the material information, right, and
so, and the SEC enforced it, right. I had to do it with when I
took things public and I sold securities and I had to do it
with my 10 Qs and 10 Ks, every quarter and every year, so what
should he do right now? He will probably be sworn into office
tomorrow. What should he do?
Mr. O'Leary. I assume you are referring to Paul Atkins.
The Chairman. Right.
Mr. O'Leary. 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--
dozens. They should have been delisted two years ago. They are
still trading. They are still raising capital.
They are 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 will hear a
lot of people saying the same thing is, you have this mandate,
now enforce it.
The Chairman. Yes. What 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 allow
them to invest in the American stock exchange--through the
American stock exchange, they will just go some other place.
What would you--what would your response be to that?
Mr. O'Leary. What is going to happen when this law starts
to be enforced is--and this is the case in almost every
regulator. There is the seven big regulators on Earth. They
speak with the SEC practically weekly.
Everybody complies with the law that is 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 is not that they like us. They want access to the
largest capital market. The reason the ADGM in Abu Dhabi
doesn't want to get involved with companies that are not
compliant with the SEC or whatever body it is in the U.S. is
because they want access to the world's largest and most liquid
capital market, and they don't want to ever be offside.
It is the strength of America and the access to the market
and the largest consumers' market that gives it its strength
and 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 am hearing is, enough and we
are going to enforce the laws, and that is probably a good
outcome for everybody. Although, you know, watching the market
go up and down 3,000 points a day, people gnash their teeth,
but if that is the price, it is worth it.
The Chairman. Chris, is this just a theoretical issue
that--you know, that these Chinese companies, we don't really
know what their financial statements are, but it is never
really a problem. No one ever loses money. Is that ever--has
that ever happened or is it just a theoretical problem?
Mr. Iacovella. No, it has happened. There have been
multiple companies. There was a pharmaceutical company named
Kang Mae where one day it was a growing 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.
That was part of some of the index funds. That is one of
the reasons why we started to get involved in this, and to
answer your--to add to what Kevin said on your previous
question, they can go overseas if they would like to, but there
is no rule of law in Hong Kong. There is no rule of law in
mainland China that stands up to our rule of law, and there is
also something called a fiduciary duty, which requires you to
do due diligence, to investigate. You have an obligation to
your shareholders to take into account reputational risks, to
your political risks.
The 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 is too big of a risk to take as a fiduciary.
I think that is a false argument. I have heard it multiple
times and that is how I would push back on it.
The Chairman. If an American investor--let's say 65-year-
old woman invested in a 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--it wouldn't take the money out of that poor lady's--they
would eat that loss themselves, wouldn't they?
Mr. Iacovella. Well, no, that fund would bring down the
overall return.
The Chairman. You mean the lady would lose money even
though the mutual fund allowed--they are the ones who bought
the stock that didn't comply with GAAP?
Mr. Iacovella. That is right. That is--and that is 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, particularly----
The Chairman. Would the exchange that that stock is traded
on, would they take the responsibility so the lady wouldn't
lose money?
Mr. Iacovella. 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----
The Chairman. Has that happened?
Mr. Iacovella. Nope, it hasn't----
The Chairman. The underwriter who sold the stock of a
company that didn't comply with GAAP has no liability in the
United States?
Mr. Iacovella. That has not been tested yet.
The Chairman. What do you think the law is?
Mr. Iacovella. With an American company that--has been
tested multiple times and the underwriter also is liable
generally. Now, the exchanges are self-regulatory
organizations, which means they have legal authority to adjust
their standards, and they are supposed to protect the integrity
of their marketplace, and if they have companies trading on
their market that aren't complying with U.S. 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 trade
on it. To date, they haven't done that.
The Chairman. 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 somebody--if they all
did this, then the only person that is holding the bag is the
65-year-old lady that thought she was buying into a safe mutual
fund.
Mr. Iacovella. That is correct, Senator.
Mr. O'Leary. Can I add something to that because I think
you made a great point. Let's say Atkins delists the Chinese
company and they immediately go to the London Exchange and say,
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, we broke the law in the U.S. Oh, please come and list
here. I mean, obviously if you are a mutual fund manager with a
mandate, you are not going to want to touch that company. Once
they get tainted by breaking U.S. securities laws, that is a
tattoo forever on that board.
They are not going to escape into any market on Earth. It
is going to make their shares worth 60 percent of retail, so I
am not worried about anybody moving, and I suggest my colleague
is 100 percent right. Once they get delisted for breaking the
law, they are radioactive waste in financial services.
The Chairman. Mr. Finta, so if you were--if you were the
new FBI Director, all right--I will give you just something
one--a Florida Sheriff said to me. They said, you know, we
probably don't really need a lot--a whole bunch of help on any
more bank robberies like we probably needed in the 30's. What
we really need is help on these international scams because we
don't have any ability to deal with these international scams.
What would your recommendation to the FBI be?
Mr. Finta. Sir, I would recommend a reshuffling of
resources to include treating these types of scams and frauds
as transnational organized crime. At the moment, to some degree
depending on where you are, but they are generally looked at as
a white-collar crime. The type of investigation that one
conducts on white collar crime as opposed to transnational
organized crime tend to differ.
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, actual organizers in a dozen different
states. You need a team to work those types of cases.
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 faster to increase the amount of accomplishment in a
shorter period of time. We could do more cases with less.
The Chairman. 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
is probably other areas. If they actually said, we are not
going to focus on that, but we are going to focus on these
international scams, would the FBI have the resources to put a
lot of smart talent against these international resources--
international scams?
Mr. Finta. The FBI hires pretty well, sir. I think they
have a lot of good smart people that can do this. I will say, I
am not going to speak for the FBI and what the resources are
right now.
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 actually staff those with budgets, with
requirements to say, hey, listen, if we are going to ask you to
do this, we are going to give you the resources to do it.
If we did, as a country, we could accomplish a lot of good,
so Kevin and 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,
all right, so is the--why wouldn't I just pick--you know, there
is no real reason--if I could pick any exchange of the world,
right, wouldn't it be--what if I could--would I have any
discount if I said, I am not going to do it here.
I am going to go and do it on the Indian Stock Exchange or
the Hong Kong Stock Exchange, or the Shanghai, you know, Stock
Exchange. Is there any reason why I would get more money, and
my trading will be clearly more liquid if I pick an American
exchange? Is there any reason to have it--is there any reason
not to do it?
Mr. O'Leary. Every company on Earth--pretty well every
company on Earth given the option would either list on the New
York Stock Exchange or Nasdaq, period. The reason they would do
that is the amount of capital that is interested in investing
in a company that has gone through the rigorous compliance and
transparency, the regulatory laws here on issuing a prospectus,
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.
The largest index on Earth is the S&P 500. It is the gold
standard. United States remains the gold standard for public
listings. There are very few exchanges that can compete. A
company, most of the time, if they believe they are compliant,
will always see the availability of an NYSC or Nasdaq listing
first.
Very often they will try London next, but it is, every
institutional investor on Earth in one way or another puts
almost half their capital into one of those two exchanges. They
are the largest on Earth, and they are going to remain that way
while the rule of law is transparent and we have an appellate
system, and we actually enforce these laws because it is--the
American economy is actually based on confidence. That is what
it is, and the belief that it is the most transparent legal
system on Earth.
Now, we have gone through a lot of issues around it, but we
have had these issues before. Why is it even adversaries want
to invest their capital here? You have to ask yourself that. It
is trust. That is it, so the answer is, more people, even
adversaries, trust the United States than any other country on
Earth, and the way you can tell is how they vote their dollars.
It all comes here.
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 laws was hurting the American brand.
That is what they were doing, and that has got to get
fixed. You don't want to hurt the mothership, the American
dream, the American brand that transcends bipartisan politics
or any generation? It has to be maintained. The way you do that
is you enforce these laws. I am very hopeful that you are
right, that we are going to see a lot of these delists, and I
am looking forward to it. 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. I am happy they will do that because I am
happy to compete with them.
The Chairman. All right. Ranking Member Gillibrand.
Senator Gillibrand. I just want to thank the three of you
for your excellent testimony. This 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. 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, but I really
appreciated the depth of knowledge that each of you have, and
you have 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 absolutely scammed out of their hard-earned dollars and
their retirement savings.
Thank you. I think that your recommendations, Mr. Finta,
with regard to resources, with regard to collaboration with
local law enforcement, with regard to creating specialized
commissions to do this work is very wise and thoughtful. Mr.
Iacovella, I really appreciated your recommendations with
regard to how we keep security firms safe. How we keep
investments by our states to be protected and good investments.
I think your insights in that is extraordinarily helpful.
I think, Mr. O'Leary, your insights with regard to how we
incorporate how we have laws that protect U.S.-based companies,
how we allow for U.S. based companies to compete worldwide is
very important, and I couldn't agree with you more that the
stability of U.S. markets and the fact that people respect our
law enforcement and the oversight and accountability that we
can provide in this jurisdiction is worth everything. It is why
people want to do business in the United States.
Thank you all for being such important leaders, and I
appreciate all the contributions you made to us and to this
Committee.
The Chairman. Thank you, Ranking Member, and we have got a
couple--we have got a few House members coming back, but I have
got another question.
I just want to--so Mr. O'Leary, what if there is a company
called ByteDance and owned a subsidiary called TikTok, and the
U.S 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 sell.
Now, if that happened, it would be whatever their free
market would be. They would sell at some price,--whatever that
price is, right, but what if the government of China had the
right to say, no, you can't sell it, and so what happens?
What is the spread--now, what would be the spread probably
in the value of something like that if you say you can't do
business, you got to shut down in America for the parent
company, for TikTok, or you can go sell to the highest bidder?
What would--so what would be arranged and how--and would
that be a material disclosure that was not made by the
underwriters, required by the SEC, enforced by an exchange?
Mr. O'Leary. Yes. TikTok 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 have never seen anything like it and I
don't think in history we have had anything like this.
Not only did Congress pass a law specific to it, but the
Supreme Court ruled nine to zero in further definition and
resolution about exactly what was intended by that law.
However, it has seven million American businesses operating on
it, generating somewhere between $15 and $17 billion of
revenue.
And in a commercial environment, that is of interest to
many investors, including me and others, and this is the first
time I have ever seen a private equity deal basically where the
actual deal terms are written into a law from Congress and the
Supreme Court. I don't--I think that is absolutely unique.
Now everybody is trying to interpret what these laws are to
actually do this deal. We have now given a new 75-day period. I
doubt there will be another one, but I think there will be a
deal done according to the law because there is value there and
markets clear at whatever price it has to be.
I have heard estimates of as low as $20 billion without the
algorithm. As high as $40 with it, so who knows? Apparently, it
is pretty clear to me today after what I have listened to that
there will be no algorithm in the deal.
The Chairman. It is clearly a change in value, right?
Mr. O'Leary.. Yes, but you know, it will be open price--the
great thing about American capital markets, it is an open price
discovery.
Once the rules are placed in place and the investors are
there, it is going to be negotiated based on whatever the
clearing price is, and I think that would be an orderly way to
get this thing done.
I mean, I would prefer to see it, and I think it would be
better for our markets to have the competition of this social
media platform as long it was operating in compliance with the
law, but you know, it is--I just have never seen anything like
it, and I think it is--for me it is a legacy deal of a
lifetime. It is just--if I am in any way part of the solution,
I will be very proud because here is how I feel about it.
Those seven million small businesses, they are all Shark
Tankers. They are all second-generation American entrepreneurs,
and we should protect them. We should make sure they survive
this whole thing. It is not their fault. It is a shame to shut
their businesses down. Whether it is lipstick, or clothing, or
whatever their product or service is, they are generating----
The Chairman. It is a business----
Mr. O'Leary. Yes.
The Chairman [continuing]. and it is shops. There is
income.
Mr. O'Leary. Yes. That is it.
The Chairman. Congressman Hinson.
Representative Hinson. Thank you. Thank you, Mr. Chairman,
and to our Ranking Member as well, for hosting this hearing
over on your side. It is great to be over here. Over and over
again, we continue to see Chinese companies systematically
working around and continuing to take advantage of our laws to
boost their growth while cutting us out of that process.
They have been playing long games in this case, and too
often we have been used and outmaneuvered, and as we have heard
discussed today many times, American retirements and
investments have flowed directly into these companies that
strengthen the CCPs surveillance state and in many cases are
tied directly to force labor violations.
That is why I recently reintroduced 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, duty evasion, transshipment, forced labor violations, all
the things that we have talked about today that disadvantage
American workers and American businesses.
Mr. O'Leary, my first question is for you today. How do CCP
state subsidies and the dumping practices that they regularly
utilize distort our markets, and how do they hurt our domestic
manufacturers and producers, particularly in rural communities
like mine in Iowa?
Mr. O'Leary. Well, the number one way there is damage done
is not abiding by IP laws. That is probably the most long-term
damage that has occurred because it is small increments.
Undoubtedly, if you go into your constituency and ask
entrepreneurs over the last 40 years, you are going to find
many companies that were knocked off in China and nothing was
done about it.
In some cases, they are bankrupt now as a result of--you
have got to think about something. An American company that
spends, let's just do small numbers, $10 million in developing
their product, and all the R&D, and they are going to have to
amortize 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.
Let's say, that would be defined by five million in annual
sales. Five million in annual sales, generally, you are going
to make 15 to 20 percent. You can support a family. You can
grow the business. The minute that is seen by China,
particularly if it is a WeatherTech 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. They simply let the American company prove the
market and then they knocked it off. If that happened
stateside, within hours I would shut that down. It would be
easy. You could hire a local loyal lawyer to do that. Can't do
it in China.
Incrementally over the years, if there is one thing that we
could change in this current narrative with China would be to
establish reciprocal IP laws and ways to litigate them and
resolve complaints, 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.
Representative Hinson. 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. They were actually caught in an Iowa cornfield trying
to steal the seed by the FBI, and FBI pursued the investigation
and tried to hold them accountable. Actually arrested someone
here in the United States.
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 of course, protect these key industries from that
unfair competition, and as you said, they just come in and they
let us prove the market. They let us do all the work, and then
they----
Mr. O'Leary. I have learned something in the last two years
you should know, and I speak to everybody in the room on this.
They don't think there is anything wrong with that.
Representative Hinson. It is just how they do business.
Mr. O'Leary. That is not taught to them when they are young
entrepreneurs that there is anything wrong with stealing IP
because there is no consequence, and the only way--when a puppy
is being--I don't even want to use that analogy, but you got to
get the stick out.
Representative Hinson. This is about protecting Main Street
small businesses and those innovators, and so, let's talk about
the flow of capital going to these companies that are then
turning around and being used against us. We have talked about
the fact that they are able to trade on our exchanges.
One example, Chinese LiDAR Hesai with links of course to
the PLA. Also on the DOD blacklist, but they are still trading
publicly on the New York Exchange. I actually sent a letter to
Nasdaq last year asking why are they allowed to continue to do
this and remain listed.
I want to thank the chairman for his leadership in the
Senate on this issue as well, and we have tried to hold them
accountable here and try and limit this, but given these very
clear national security concerns, Mr. Iacovella, why are they
still allowed to trade on our markets when we know so very
clearly that these dollars are being used against us?
Mr. O'Leary. Hopefully with a new sheriff in town, 48 hours
from now, they won't be and I really hope that happens. I will
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 will be very little consequence to public
markets if--it will be a big wake up call. Other exchanges will
look at this, and I think there will be a reaction--and China
domestically to get on board.
Representative Hinson. Mr. Iacovella, did you have anything
you would like to add there too--since we were talking about
it.
Mr. Iacovella. No, I think Mr. Atkins will enforce the
holding Foreign Companies Accountable Act and the Accelerating
and 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 PCOB went over there and conducted audits into their
auditing firms.
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, and hopefully
these companies that have been on for almost two years now that
are non-compliant will start to be removed.
It is possible that the exchanges are seeing the wind shift
and that they can take their own regulatory action and get
these people off the exchanges because there is no reason for
them to have access to our capital markets.
Representative Hinson. Thank you. Mr. Chairman, thanks for
the indulgence. I yield back.
The Chairman. Congresswoman Tokuda.
Representative Tokuda. Thank you, Mr. Chairman. 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 the Social Security's website
has been crashing 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, and all of
this comes at a time when 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
percent cut to the agency's technology division responsible for
its website and other online platforms. Last year, during the
massive CrowdStrike 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 phishing and malicious activities. My
concern is that DOGE'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. Finta, 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?
Mr. Finta. Ma'am, that is not my area of expertise in terms
of the markets and the confusion----
Representative Tokuda. Okay, but you deal with preventing
fraud and abuse among seniors.
Mr. Finta. Yes.
Representative Tokuda. Right now our seniors who are
finding concern about their Social Security benefits as a
result of mixed messages. They are getting online and proof of
authentic--their identity.
Mr. Finta. Confusion does tend to support criminal
activity, if that is what you are getting at, ma'am.
Representative Tokuda. I think what I am getting at is that
if seniors are worried right now that they may not be getting
their payments because they have actually gotten email messages
that were incorrect, that 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.
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 in 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. Is this a
potential opportunity for scammers that we are seeing right
now?
Mr. Finta. There is no doubt in my mind that given the
opportunity, transnational organized crime groups would take
advantage of that situation.
Representative Tokuda. If we had a situation where we are
actually cutting tech staff that helped to maintain these
platforms, are we not creating a more vulnerable and
environment for scams on our seniors and our Social Security
beneficiaries?
Mr. Finta. I don't disagree with that statement, ma'am.
Representative Tokuda. Okay. I see that I have 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.
Between November 2024 and February 2025, there were over
40,000 logins to Starlink from known scam centers in the
regions. I think Ranking Member Krishnamoorthi was actually
pointing some of those out.
Mr. Finta, 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?
Mr. Finta. Ma'am, it is my experience that these companies
do have anti-fraud and vulnerable persons programs, and they do
work toward 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 toward supplementing those efforts. I am
not specifically familiar with the Starlink----
Representative Tokuda. Okay. Well, 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
senior population. Thank you very much, Mr. Chair. I yield
back.
The Chairman. Thank you. Congressman Barr.
Representative Barr. Thank you, Mr. Chairman, and Mr.
Chairman. thank you for this unusual, unique, but very
important bicameral hearing I think which underscores 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 China. Congress has been
focused on this issue in multiple Congresses, and in this
Congress, I have introduced 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 entity-based approach, and a
technology-based approach. This is important because sanctions
do provide a multilateral effect, but not all civil military
fusion happens with just listed entities. We have seen quite a
bit of venture capital and private equity flows into private
non-listed entities and therefore a technology focus is
important.
Mr. Iacovella, can you discuss why a law that prohibits
U.S. outbound investment into both specific entities is needed,
but also clearly defined technologies of national security
concern. Why is that second piece so important?
Mr. Iacovella. Thank you for the question, and we supported
your legislation, and we liked the approach that you have 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.
There is more than just public capital, as you said, that
is going over there. It is private capital, venture capital,
private equity, and public capital that is going over there,
but what is even more of an issue is that you have companies
that are subsidiaries, of subsidiaries, of subsidiaries.
Maybe the parent is on one of the DOD lists or the entity
list, and you can't get to them unless you prohibit the
sectoral investment in those Chinese companies, and so, I
appreciate your approach. I think you have threaded the needle
there and we strongly support it.
Representative Barr. We want to give the private sector the
red light, green light approach, but we think we can get at
this problem and accomplish that by clearly defining the
technologies of concern.
Mr. O'Leary, the Fight China Act, this bill that I have
introduced, requires the Treasury Department to regularly
review whether companies on U.S. Government blacklists, such as
commerce export controls, sanctions, DOD lists, whether they
should be added to this treasury CMIC list, 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 U.S. firms to determine whether or not
they can invest in China?
Mr. O'Leary. Yes. That is one of the great challenges. You
don't want to go through the cost of starting a deal or an
investment and doing the diligence on it only to find out that
it is going to breach this law.
It is almost like a CFIUS issue. You don't know the outcome
till you test it, and so, if there was a better way to do that
where--particularly in a larger transaction, where they could
just come to staff and say, look, we are we want to invest one
billion in this thing, is it going to pass or not, or do we
actually have to test it? Yes.
Representative Barr. We have a provision in the bill that
would allow for that guidance----
Mr. O'Leary. 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 is a very material transaction. If you are not okay
with it, just tell me now. Because nobody wants to burden it
with litigation, which has been a problem lately, is not the
answer. Just yes or no, right. That is much easier.
Representative Barr. I think we have threaded that needle
by not having a reverse CFIUS, but it is a clear red light,
green light system there. Mr. Iacovella, in your testimony you
refer to passive index loophole, and state that there are more
than 2,000 U.S. mutual and exchange traded funds that have $294
billion invested across Chinese stocks and bonds. The concern
obviously is that American investors may be unwittingly
financing the Chinese military industrial complex. Can you
explain how the Fight China Act would curtail that loophole?
Mr. Iacovella. 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 will find
is that New York lawyers are going to come down here and they
are going to try to create loopholes to the loophole, and they
are going to interfere with what it is that you are trying to
do, which is very novel in stopping our money from going and
funding the Chinese Communist Party's technological and
military rise, as well as their funding of the surveillance
state, which aids and abets the interment of Uyghurs. I think
that your bill does a lot, and I think that it goes a long way,
but it needs to be much broader because the CCP owns a stake in
everything.
Representative Barr. All right, thank you. Yield back.
The Chairman. Thank you. Congresswoman Brown.
Representative Brown. Thank you, Chairman Moolenaar,
Chairman Scott, Ranking Member Krishnamoorthi, and Ranking
Member Gillibrand for holding today's hearing, and thank you to
our witnesses for being here.
The 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.
Today's threats include everything from shadowy financial
schemes backed by the 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. These agencies are on the frontline
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 is 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.
The FTC has also shone a light on scams like romance fraud,
tech support, cons and crypto related 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 is why the CFB's proposals matter. Mr. Finta, given
how much elder fraud is occurring on these platforms, how
urgent is it for Congress to support CFB's efforts and close
the regulatory gap? And what additional safeguards should we
look at to protect seniors as these tools continue to evolve?
Mr. Finta. I appreciate the question, and you are correct.
Each of those agencies has a role to play in the overall
process of not only preventing frauds but going after the folks
that do propagate them. I think that is one of the big things
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 are 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. Now, in terms of the regulatory side of
thinking, again, that is outside of 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
you are adversaries, is no trivial amount.
Representative Brown. Thank you. Instead 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 percent from the year
before.
We know that this is likely an under count 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. That includes
companies using corporate shells designed to evade both China's
and U.S. investment protections, and firms tied to military and
surveillance industries through CCP's made in China 2025
strategy.
We need to shed light on these 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. O'Leary,
with my few minutes, you spoke about how 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?
Mr. O'Leary. To ban the use of VIEs, which are a structure
used for what I would call a faux share. These get indexed. In
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 pension plan. I mean, this is a shadow share is what
it is, and yet we allow it.
The other is to actually just enforce existing laws around
the golden share. Because, you know, if you hold a company,
just to make an easy example, if you have $100 in an index fund
and you have got 10 companies, $10 in each one, and one of them
just goes to zero--and there is many examples of these Chinese
golden share companies just going to zero and you don't know
why.
You have basically lost. The value of that index is now
$95, and why put it in there in the first place? Even if the
law allows to have--I don't know how that is going to happen,
but you know, we have been talking today about de-listing all
these companies, and I think that might be happening soon.
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 have let this cancer creep into it, and to stop
this is to simply enforce existing laws and add new ones. I
don't want to own a VIE if I am an indexed pensioner. Why would
I want to own that?
A Cayman shadow share from a company with a super
preference. I mean, it is 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 is just a simple applying these
existing laws and fine tuning to remove the tumor that is in
there.
This is a cancerous tumor in our financial services system,
and we have good doctors here, so chop, chop. Let's just cut it
out.
Representative Brown. My time has expired. Thank you for
your courtesy, Mr. Chairman, and thank you, Mr. Wonderful.
The Chairman. Thank you. Chairman Moolenaar.
Chairman Moolenaar. All right, thank you. Mr. O'Leary, just
to followup on that discussion. The Trump Administration is
having an ongoing review of ERISA standards to ensure that
foreign adversary companies are ineligible for pension plan
contributions. You have been talking a lot about these issues,
the lack of investor safeguards, you know, geopolitical risk,
the lack of the ability to due diligence on some of these
things.
You just mentioned the, you know, shadow shares, and I
guess, you know, when you talk about VIEs--what percent of
investors are even aware of this? What percent of financial
advisors or people in this business who are advising seniors
would even be aware of this? I think I would like to ask all of
you this question.
Mr. O'Leary. You know, the majority of index funds or ETFs
are administered by fiduciaries inside large distribution
companies like Fidelity or Schwab, and they just--their job is
to be compliant, and so, it is very rare that they ever go
rogue and put anything into an index that is not permitted by
law, and so, it is just a matter of making sure that we give
them good definition of what is not permitted, and they will
comply--99 percent of them will comply.
We built in great safeguards for this stuff. We just
haven't really implemented or made them obvious enough. Because
when you ask how many investors, if I took 10 people in the
hall outside here and asked them, do you know what a VIE is?
They would say no. Do you own one? I have no idea what that is.
It is not a real share, and it is--we have let Chinese
companies rig or take advantage of the system we have provided
and the lack of enforcing it to get to this extreme point.
I don't know the exact amount. I am going guess,
guesstimate how many Chinese companies are listed on Nasdaq and
NYC. I am going to guess between $700 and $800 billion worth of
market cap. A majority of them should be delisted if we enforce
the laws as they should be enforced, and many of them, in my
guess, would say, wait a minute. I am sorry I didn't get it
done in the last 24 months, but I am going to hire American
counsel. I am going to--I am going to get compliant, and it
would be a great first step because you would force the
transparency.
Then the--you know, the--you know, I used to be in the ETF
business. Every single firm that distributed, we had to go
through the whole compliance process. It cost millions of
dollars, but the system works. If you want to index, you got to
make sure that you know what you are putting in there because
other people are relying on that and trusting you to do it.
We have been talking all day about how we are actually
eroding the system by not enforcing these laws because people,
when they start to learn about shadow shares and VIEs, are
saying, what the hell is this stuff? Like, why is it in here?
Chairman Moolenaar. I am--I guess what I am wondering is,
let's say, you know, I am someone who has an account at
Fidelity or some other, and I go to my financial advisor, and I
am trying to get advice on this. Would they even know VIEs, or
would they just simply say----
Mr. O'Leary. No, they rely on their compliance departments.
Some do. Some, you know, RAs and some advisors do but not many.
They just rely on the system, and so, you got to make sure the
system works.
Chairman Moolenaar. Yes. You got to change the system.
Mr. O'Leary. Yes.
Chairman Moolenaar. Okay. Mr. Iacovella.
Mr. Iacovella. Yes. If VIEs are in an index fund, then it
is the obligation of the fiduciary to track the index fund, and
that is what they do, and the CCP, it has been reported, they
pressured MSCI and others to actually expand the percentage of
Chinese companies that go in these index funds, and they will
continue to do it, and the VIE structure, there is no economic
rights. There are no voting rights. There is no control over
the board, and then these companies get to list in our
marketplace.
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 all of their shares in the
company from day one to day two and you are not going to know
about it until the stock price just keeps going down and
information leaks out. Who gets harmed by that?
Chairman Moolenaar. Thank you. I yield back.
The Chairman. Congressman Stanton.
Representative Stanton. All right. Thank you very much,
Chairman Scott and Ranking Member Gillibrand, and of course,
Chairman Moolenaar from the House side, and Ranking Member
Krishnamoorthi. This is a very important hearing. I am glad
that you made the time to host us here today.
I represent the State of Arizona, which is 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 is just
the scams we know of. Many seniors never report that they have
been victimized.
The U.S. Government has 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 United Nations, 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. They 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. Finta, you have spent two decades at the FBI working on
transnational organized crime. You testified here this morning
that U.S. law enforcement does not have the resources to
effectively pursue complex transnational elder fraud cases. You
may have already covered this, but cover it again. It is worth
covering again.
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 technologies.
Mr. Finta. I appreciate that. I would like to clarify that
the FBI, HSI, Secret Service, IRS--all have very capable agents
who can and do these investigations on a regular basis. The
issue there is the volume. It is the number, and while you are
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 timeframe and losing
their life savings.
It is not that it is beyond our capability. It is beyond
the resources in terms of the fire hose in the face of these
investigations, and yes, if the individual agents, and
officers, and 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 we always see
on the wall in TV.
The issue here is the aggregation of those cases
essentially with the private sector to grow those cases quickly
and effectively so you can do more of them to provide that
disincentive. I don't think we are going to be able to rest our
way out of this problem, but I think it is a giant factor that
could contribute to reducing it over time.
Representative Stanton. Okay. I appreciate the point. Well
made. These last few days have been incredibly volatile with
the stock market down more than 10 percent, with the change in
tariff policy.
It is coming back up today, thank goodness, but especially
for our seniors who may be living off of their retirement
accounts, that volatility is scary, and fear is something the
scammers prey off of. As fear grows, scammers will find easier
targets. As retirement accounts shrink scammers will find--will
land harder blows.
Mr. Iacovella, 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 one?
Mr. Iacovella. Yes, that is exactly right, Congressman.
The--one of the things I would like to follow on with what Mr.
Finta said is that the public-private partnership in this area
is crucial.
We need to be able to tell the government exactly how we
are being attacked, who is attacking us, and what different
sophisticated technologies they are using and methods that they
are using in order to get at our customers. Because it is our
customers who they are attacking. They get in their emails.
They reset rules in the emails. They redirect things so people
don't even understand what is happening, and it even looks like
to our membership that it is coming from their customers.
Then once the customer is scammed, people know about it,
and somebody else comes in who probably was part of the
scamming and says to them, hey, if you just pay me a thousand
dollars, I will help you to try to recover some of the funds
that just left the country. That is the first piece, and then
it just drags on for a little while longer. Then you get
another thousand, and another thousand.
Before you know it, they are out another $10,000 or $15,000
by the same people, and they don't get their money back, and
they have been scammed again, and that is exactly what you are
talking about, about follow on.
Representative Stanton. Thank you very much. Looks like Mr.
O'Leary may have--were you going to jump in and answer on that
as well? Okay. I yield back.
The Chairman. Thank you. I would 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 U.S. investments. Here is the takeaway for everyone,
especially American seniors.
Make sure your dollars are not invested in Communist China.
I look forward to continuing to work with members across the
aisle and down the dais 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 hard earned 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. I thank each of you.
[Whereupon, at 5:01 p.m., the hearing was adjourned.]
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APPENDIX
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Prepared Witness Statements
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U.S. Senate Special Committee on Aging
"Financial Aggression: How the Chinese Communist Party Exploits
American Retirees and Undermines National Security"
April 9, 2025
Prepared Witness Statements
Kevin O'Leary
Chairmen Scott and Moolenaar, Ranking Members Gillibrand
and Krishnamoorthi, members of the Senate Special Committee on
Aging and the House Select Committee on the Chinese Communist
Party, thank 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 like me who has tried
to do business in China, everyone that invests in the stock
market, anyone that invests in passive investment vehicles like
international index funds or mutual funds, any retail investor
that invests in Chinese companies, anyone who invests
intentionally in emerging markets like China, and everyone with
a 401k plan or pensions invested in international index funds.
Of course, millions of American seniors fall into one or more
of these categories.
I've been a businessman, a private equity and venture
capitalist, my entire adult life. I started a software company
in 1986 and at one point owned such popular IPs as the Oregon
Trail, Carmen Sandiego and Reader Rabbit before I sold the
company for $4.2 billion in 1999. I now maintain a portfolio of
investments in a number of businesses in multiple sectors of
the economy held though Private Equity and Venture Funds. I
like to think I know what a good deal is. I certainly know what
a bad deal is, and investing in China under the current
reciprocal imbalances is a very bad deal.
I have nothing against the Chinese people. Their
contributions to science and art over the millennia are well
documented. They are wonderful people and incredibly talented.
Many of my team members in my operating company are of Chinese
or Asian descent. It's their Government I take issue with. In
my opinion, since joining the WTO in 2000 the Chinese
Government has never played by its rules. The Chinese Communist
Party has the ability and the desire to exercise total control
over its people and their companies - and anyone else who wants
to do business with or operate inside its territory. This has
led the CCP to passing various laws in the realm of
cybersecurity, espionage, intelligence, and beyond, and other
mechanisms to control its corporations, industries, and
business partnerships, all to the detriment of US investors.
This is not a new phenomenon - it has been part of the
long-game China has been playing for decades. We just are slow
to wake up to these harsh realities and even slower to change
our behavior. But the time for change is now - before it is too
late and billions of dollars of wealth our current seniors and
future retirees are counting on are wiped out.
Let me just elaborate briefly on a few reasons why the time
for us to address this matter is TODAY.
A new buzzword started going around at the start of the
year - "Golden Share." Well, not only is it a buzzword, but it
is also a problem and exemplary of all the risks to investing
in Chinese securities. In its desire to reduce state-run
companies, the Chinese government divested itself from them,
sort of - but retained these golden shares, or "special
management shares" as it is officially called, as a means of
continuing to control these entities while it officially
divests themselves from the company. In return for taking a 1%
share in the company, or all their subsidies, the government is
granted a seat on the board, voting power and influence over
all business decisions. Whether divested for financial reasons
or optics, there is nothing good that comes from investing in a
company with special management shares reserved for the Chinese
Communist Party. As America's former Secretary of State rightly
noted, "in China, there's really no distinction between private
companies and the state."\1\
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\1\ https://www.cbsnews.com/news/antony-blinken-face-the-nation-
transcript-02-19-2023/
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We see the use of Golden Shares as China uses that to
control new media companies and tech companies. As of 2023, 37%
of companies listed in Shanghai and Shenzhen had amended their
charters to formalize the role of party committees inside the
companies. This is in addition to China's 2017 National
Intelligence Law which requires all firms in China to accede to
government demands to provide information and data as
authorities deem necessary to protect China's national
security.
If China maintaining control of companies wasn't bad enough
for investors, China prevents foreigners from owning Chinese
companies. Instead, they've cleverly exploited the U.S.
financial system's creation of Variable Interest Entities
(VIEs) to approximate the owning of corporate shares. If you
own stock in a company like Tencent, Alibaba, or the 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. Investors are buying in the VIE
investment structure that relies on a contractual arrangement
with the parent company to allow a foreign investor to control,
but not directly own, the operating company. I estimate that
90% of Americans who hold these companies in their portfolios
have no idea that this situation exists.
Congress has passed a law to try to solve this problem,
yet, the problem persists.
The U.S. has given China preferential treatment for over a
decade through its own special MOU that governs accounting
standards and oversight. This sweetheart deal with the Public
Accounting oversight Board (PCAOB) has allowed China to
continue to game the U.S. financial system via their special
treatment that is not afforded other countries - even our
allies. Despite efforts to update these accounting agreements,
it is no fairer to do business with China; there is no reliable
rule of law, no reciprocity for Western businesses to be
treated in China how the West treats Chinese businesses, no
consequences for IP theft, or market access. This is a
completely unbalanced and non-reciprocal situation. Why do we
allow this? How can this be in any way viewed as fair to
American investors?
What's worse, is these investment schemes all benefit
China's core industries - their "Made in China 2025" benchmarks
that channel investment into priority sectors that underpin
their national military-civil fusion strategy. So, by investing
in China, Americans are propping up their military,
surveillance state, industrial capacity that operates off of
unchecked environmental spoilage, slave labor, forced organ
harvesting, and gross human rights violations. Not to mention
that these companies are the very ones that then destroy U.S.
jobs and industries through their corporate espionage, IP
theft, dumping, trade crimes, and more. None of these are good
things to be invested in, and even more so, if the investment
itself isn't sold, there is every reason to change course and
protect your assets.
At the end of the day, the American investor owns nothing
and there is nothing stopping China from voiding out this
agreement.
Every American has exposure to China in their 401k's and
retirement accounts. If you invest in an Emerging Market Index
Fund, about 25% of your fund is invested in China. If you
invest in a Total International Index Fund, about 10% of your
fund is invested in China. If China goes to war with Taiwan,
those investments could go to zero. A retail investor that buys
shares of Ali Babb because they think it'll be the next Amazon,
does not actually own the stock. Should we allow a retail
investor to buy fake shares of a real company? Should a retiree
potentially lose 10% of their international equity portfolio,
when it is 100% preventable?
I'm glad this hearing is happening today and there is
bicameral and bipartisan interest in solving the problem. We
can fix the problem. There should be complete parity with the
US and China, but we need to act NOW to protect US investors
and the federal government. I believe Congress should act to:
Delist CCP-affiliated companies until there is parity 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, we should not
let their businesses operate in the U.S.
We should exit China's marketplace until the CCP makes
significant reforms.
We should demand that all Chinese companies engaged in
US markets comply with US accounting standards.
For decades across multiple administrations, we have
discussed leveling the playing field with China, instead the
situation has only gotten worse. Make no mistake, I want to do
business in China as so do millions of other investors and
companies, but we want a reciprocal ecosystem that is
transparent and where all parties play by the rules mutually
agreed upon. I want access to the Chinese legal system so trade
and IP grievances can be litigated and resolved. The Chinese
enjoy these rights in the US. Why do we not have them in China?
Lately there has been a lot of rhetoric during negotiations on
who holds the "cards". The US is still the world's largest
market supported by the world's largest economy under the rule
of democratic law. That's why so much of the world's capital is
invested here. That's a lot of leverage, lets fix this Chinese
problem while we still hold the cards.
I look forward to a robust conversation today and answering
any questions you may have.
U.S. Senate Special Committee on Aging
"Financial Aggression: How the Chinese Communist Party Exploits
American Retirees and Undermines National Security"
April 9, 2025
Prepared Witness Statements
Christopher Iacovella
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U.S. Senate Special Committee on Aging
"Financial Aggression: How the Chinese Communist Party Exploits
American Retirees and Undermines National Security"
April 9, 2025
Prepared Witness Statements
Brady Finta
My name is Brady Finta and I am the Founder of the National
Elder Fraud Coordination Center. I'm honored to be here to
contribute to this very important discussion. I believe the
scale of fraud against America's elders has grown to epidemic
proportions and it is time we, as a country, treat it as such
with a proportionate response.
I spent 23 years as an FBI agent, predominantly
investigating and supervising Transnational Organized Crime
cases. When my assignment exposed me to elder fraud, I was
comfortable, as the cases were simply Transnational Organized
Crime cases under a different name. What I was not prepared for
was the volume. Just in my limited territory of San Diego
County, I was inundated with elder fraud complaints without
adequate resources to impact the threat. No one has that level
of resource. Even after standing up the FBI San Diego Elder
Justice Task Force alongside the San Diego District Attorney's
Office, and bringing forward our very first successful RICO
prosecution, our ability to make a dent in this crime problem
was minimal, particularly as we were only able to address less
than 1% of the available leads. Based on my experience, and
conversations with partners across the country, I believe only
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 far too large to investigate under the
current circumstances. Elder fraud and scam cases are not easy
to investigate and are incredibly time-consuming. They
literally span the globe, combining organized crime groups in
foreign countries, with regional organizers, co-conspirators
and mules in the United States. Laundering the proceeds of this
crime runs the gambit from cash to gift cards, to wire
transfers, to digital currency. The scams encompass everything
from feigned love to fear and are highly effective. For the
most part, the complexity of the cases, combined with their
innate jurisdictional challenges and resource requirements,
limit their investigation and prosecution to federal entities,
further straining those resources. In just one very typical
case I oversaw, we had scammers in India working regional
organizers in the Bahamas, mules in the Dominican Republic and
the United States, and Canadian and Chinese organized criminals
laundering the proceeds. The international nature of these
scams makes it extremely difficult for law enforcement and
prosecutors alike to hold these criminals accountable and
attempt to provide restitution for victims. It gets even more
difficult when the country where the crime ring is based is
uncooperative with U.S. based law enforcement. While this
hearing is intended to focus mainly on China, I want to
emphasize that this is a larger issue that we currently do not
have the resources to effectively pursue.
This threat touches all of us. I would venture to say
everyone in this chamber has a story of a loved one, an
acquaintance or co-worker who was victimized; both my parents
were victims. My mother did not even want to tell me based on
embarrassment and believing, "There's nothing anyone can do
anyway." There is always something we can do. The FTC's
estimate that the annual losses to this scourge are
approximately $61 billion and the FBI's statistics that show a
huge increase in these complaints over the last few years
further underscore that the time is now for a more dramatic
response, a whole of society response.
As a country, we have created national task forces of
local, state, and federal agencies to combat illegal narcotics,
child exploitation, and terrorism. Our parents and grandparents
deserve the same. In 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
continued education campaigns, information sharing and new
preventative efforts, a true public/private partnership which
combines law enforcement with the many robust anti-fraud
efforts already part of so many companies across the United
States could create real impact. This is the mission of the
National Elder 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,
AARP, Amazon, Google, and Walmart, are dedicated to the idea of
pooling their resources towards this worthy cause, and our
partnership with the National Cyber-Forensics and Training
Alliance offers the opportunity for hundreds of other companies
to do the same.
Thank you for your time and attention to this important
issue. I look forward to answering your questions.
?
=======================================================================
Questions for the Record
=======================================================================
?
U.S. Senate Special Committee on Aging
"Financial Aggression: How the Chinese Communist Party Exploits
American Retirees and Undermines National Security"
April 9, 2025
Questions for the Record
Christopher Iacovella
Senator Raphael Warnock
Question:
In recent years, scammers and fraudsters have used more
sophisticated techniques, such asartificial intelligence, to
defraud seniors. What can Congress do to help the private
sector combat the use of artificialintelligence in fraud? In
addition to artificial intelligence, what other new
technologies and techniques doyou see being used to target
seniors?
Response:
We think Congress can play a role by clearly defining a
single agency that the private sector can send information to
about the latest scams and tactics being used to target
American citizens. This agency would not take retaliatory
action against private business, but act as a clearinghouse to
filter information and summarize it for policymakers and the
public so we can stay alert and be vigilant. This information
flow could take the form of an anonymous submission. However,
it would be best if the agency knew who sent the information so
adequate follow-up could be conducted. Having a conversation to
discuss the details of these issues is extremely important.
This function could be run out of the FBI with close
coordination from a dedicated group within the U.S. Securities
Exchange Commission (SEC), each banking regulator, U.S.
Treasury, the DNI, and a dedicated person from the Financial
Stability Oversight Council (FSOC). These scams are not limited
to bank and brokerage accounts, they also include the purchase
of timeshares and other types of real estate deals in Mexico
and other regions. I would also recommend an important
presentation by Adam Anicich at the SEC, which describes some
of the other types of scams that are being used beyond those
related to Generative-AI. A link to his presentation is here
https://www.sec.gov/files/20250306-isc-fraud-briefing-iac-
meeting.pdf. Please feel free to reach out and use me and our
organization as a resource as you think about ways to combat
these scammers and protect American citizens and our seniors.
U.S. Senate Special Committee on Aging
"Financial Aggression: How the Chinese Communist Party Exploits
American Retirees and Undermines National Security"
April 9, 2025
Questions for the Record
Brady Finta
Senator Raphael Warnock
As the Founder of the National Elder Fraud Coordination
Center, you have witnessed firsthand how fraud against seniors
remains a persistent and growing problem. In your written
testimony, you cite only 10 to 15% of elder fraud victims
report the crimes against them.\1\
---------------------------------------------------------------------------
\1\ Financial Aggression: How the Chinese Communist Party Exploits
American Retirees and Undermines National Security Before the Senate
Special Committee on Aging and House Select Committee on the Chinese
Communist Party, 119th Cong (April 9, 2025) (testimony from Brady
Finta, Founder of the National Elder Fraud Justice Coordination
Center), https://www.aging.senate.gov/imo/media/doc/713d6dee-b247-ab39-
387e-35005767f950/Testimony--Finta%2004.09.25.pdf.
---------------------------------------------------------------------------
Question:
Why are reporting rates so low?
Response:
In my experience, the lack of reporting is a combination of
factors, the most prevalent being embarrassment and a feeling
of hopelessness that "no one can do anything about it."
Question:
What are some consistent barriers seniors face when
reporting these crimes?
Response:
Most consistently, the biggest barrier is the response
given by the vast majority of law enforcement agencies: "Sorry,
there's nothing we can do."
It has been my experience that victims are more likely to
report to their financial institution or whatever company was
used as a vehicle for the fraud. This is why partnering with
these companies is a part of the solution.
Question:
How can Congress make sure that more of these crimes are
reported?
Response:
Congress should fund and require the formation of Elder
Justice Task Forces across the United States. When a city is
equipped with an EJTF and personnel are permanently assigned to
working those cases, word gets out that there is somewhere to
go and there is a higher level of trust that something can and
will be done. I've seen this happen in San Diego County.
Representative Haley Stevens
Question:
When fraudsters gain access to retirement accounts-often
through various forms of scams-they sometimes withdraw funds
directly by the fraudster or indirectly by the victim,
triggering not only massive financial losses but also
unintended tax consequences. For victims under 59+, these
unauthorized withdrawals carry a 10% IRS early withdrawal
penalty, and the IRS still treats the stolen amount as taxable
income. This means victims may be penalized twice-first by the
fraud and then by the tax code. I recently introduced the No
Penalties for Victims of Fraud Act to waive the early
withdrawal penalty and give victims a pathway to recover
financially.
Based on your experience with financial fraud cases, how
significant are tax penalties for victims of fraud trying to
recover stolen funds, and what additional steps should Congress
consider to ensure that retirement systems and financial
institutions are not only responsive after fraud occurs, but
proactive in preventing account compromise in the first place?
Response:
In my experience, taxing fraud losses is devastating to the
victims. For many victims, it takes a very long time, if ever,
for them to come to terms with the sometimes life-changing
financial loss. This combined with the anger, shame and guilt
often lead to health issues, isolation and mistrust. All of
these residual effects of the crime are compounded when they
later learn they must pay tax on money that was stolen from
them. I'm sure to many this feels as though the US government
is a part of the fraud.
Question:
We're seeing a disturbing rise in AI-generated fraud
schemes-voice cloning, deepfakes, synthetic identities-that
make it easier for criminals to impersonate family members,
financial institutions, or even law enforcement. These tactics
are being rapidly adopted by transnational crime groups,
including those with ties to the PRC, to target vulnerable
Americans, especially seniors.
From your perspective, how is artificial intelligence
changing the way financial scams are conducted, and what types
of safeguards or public-private collaboration should Congress
be pursuing to stay ahead of these rapidly evolving threats?
Response:
Criminals will always use whatever technology and tactics
are available to them to further their criminal schemes. I
believe we must use the advantages cutting-edge technology
offers to combat these frauds. Traditionally, the government
has been too slow to employ new technologies in law
enforcement. This is why a real-time and robust public/private
partnership is key to allow industry to assist government in
the responsible use of new fraud-fighting tools.
Question:
Law enforcement agencies across the country are
increasingly overwhelmed by the scale and complexity of
international scams involving digital currency, malware, and
global money laundering networks. These schemes-many of which
are linked to PRC-based criminal groups-are so widespread that
even the Department of Justice's Elder Justice Task Forces,
which are located in every U.S. Attorney's Office and
coordinate federal, state, and local efforts to combat elder
abuse, can only pursue a small fraction of reported cases.
What cybersecurity or investigative capabilities should
Congress strengthen to ensure that law enforcement can
meaningfully respond to PRC-linked financial crimes targeting
U.S. seniors? Should Congress consider additional dedicated
funding streams or task force expansion models?
Response:
Absolutely! While the DOJ has prosecutors assigned to the
Elder Justice Task Forces, they do not have investigators.
Without full-time investigators assigned to generate and work
elder fraud investigations, the prosecution cart has no horses
to pull it. Just as we as a country have done with Health Care
Fraud Task Forces, Internet Crimes Against Children Task
Forces, Safe Streets Task Forces, Organized Crime Drug
Enforcement Task Forces, and Joint Terrorism Task Forces we
must stand up Elder Justice Task Forces in every major city of
the United States. We must then link these EJTFs in a
meaningful way linking the biggest, most impactful cases and
supporting them with the data of the private sector. The
combined efforts of these EJTFs can play a huge role in bending
the elder fraud curve.
Question:
According to recent reports, U.S. pension funds-including
those for state teachers and public employees-have invested
billions in PRC-based firms, including some tied to
surveillance, defense, or forced labor. While many have since
reduced exposure, concerns remain about ongoing fiduciary risks
and national security implications.
From your perspective, what are the risks associated with
continued public pension investments in PRC-linked entities,
and how should Congress work with state and federal fiduciaries
to better insulate retirement savings from exposure to
adversarial economic systems?
Response:
This is clearly a risk. I believe regulation and education
on this front is essential. However, there are hundreds of
thousands of older Americans losing their life savings every
year to pure fraud, aided often times from Chinese entities. In
my opinion, pouring resources into stopping those who
specifically target vulnerable Americans to steal from them to
the tune of $61B a year should be of the highest priority.
Question:
Data shows that only 10 to 15 percent of elder fraud
victims report the crime, and even fewer are able to recover
their losses. The complexity, international scope, and
emotional shame tied to these scams all contribute to
underreporting, while the current support infrastructure-
particularly for seniors-is limited in reach and scope.
What changes should Congress consider to improve the
reporting process and ensure more comprehensive support for
victims-particularly seniors-who fall prey to these often-
sophisticated and internationally coordinated scams?
Response:
Under reporting is a huge problem. Not only do the victims
feel hopeless, leading to a more difficult recovery process,
law enforcement does not have all the pieces of the puzzle to
put effective cases together. Unfortunately, this will likely
not change until there are EJTFs in more jurisdictions. When a
city is equipped with an EJTF and personnel are permanently
assigned to working those cases, word gets out that there is
somewhere to go and there is a higher level of trust that
something can and will be done. I've seen this happen in San
Diego County.
=======================================================================
Statements for the Record
=======================================================================
U.S. Senate Special Committee on Aging
"Financial Aggression: How the Chinese Communist Party Exploits
American Retirees and Undermines National Security"
April 9, 2025
Statements for the Record
Senator Rick Scott Letter to SEC Nominee
I would first like to congratulate you on your nomination
to lead the Securities and Exchange Commission (SEC). The SEC
plays an important role in protecting our markets, American
investors and their livelihoods, and I look forward to working
with you and President Trump's administration to ensure the
integrity of our markets.
For years, I have been sounding the alarm to prior SEC
Chair Gary Gensler regarding the ongoing issues with Chinese
companies listed on U.S. Exchanges. These companies
consistently fail to meet the requirements of our markets -
misleading American investors and putting their investments and
U.S. national security and economic security at risk - and the
Biden administration and SEC Chair Gensler consistently failed
to enforce the Security and Exchange Commission's (SEC)
accounting standards and disclosure requirements that are
required by law.
In 2020, the Holding Foreign Companies Accountable Act
(HFCAA) was signed into law, requiring the SEC and Public
Company Accounting Oversight Board (PCAOB) to identify publicly
listed foreign companies that regulators have been unable to
inspect or investigate. This law specifies that if a foreign
company is not in compliance with reporting requirements for
two consecutive years, the SEC must prohibit the securities of
the issuer from being traded on any U.S. exchange.\1\
---------------------------------------------------------------------------
\1\ In December 2022, Congress amended the act to reduce the three-
year period to two years.
---------------------------------------------------------------------------
According to recent reports\2\, Chinese companies listed on
U.S. Exchanges continue to disregard SEC accounting standards
and compliance deadlines required under the HFCAA. These
standards are set to provide financial transparency and ensure
every company listed on our exchanges is accurately disclosing
the necessary business information needed to invest with
prudence.
---------------------------------------------------------------------------
\2\ https://www.wsj.com/opinion/sec-needs-to-hold-chinese-
companies-accountable-investors-stock-exchanges-768157e0
---------------------------------------------------------------------------
The U.S.-China Economic and Security Review Commission
(USCC) recently reported that there are currently 286 Chinese
companies listed on U.S. Exchanges with a total market cap
exceeding $1 trillion. Since January 2024, 48 of these Chinese
companies were newly listed on three of our U.S. Exchanges.\3\
With such a large amount of capital invested in those foreign-
domiciled companies, failing to enforce the accounting and
disclosure standards required by the HFCAA poses potentially
dire risks to U.S. investors.
---------------------------------------------------------------------------
\3\ https://www.uscc.gov/research/chinese-companies-listed-major-
us-stock-exchanges
---------------------------------------------------------------------------
The U.S. capital markets are the envy of the world,
providing unparalleled access to funding for companies
worldwide. However, this privilege comes with responsibilities,
chief among them being transparency and adherence to our
financial disclosure rules. It is alarming that Chinese
companies continue to enjoy access to American capital while
refusing to play by our rules.
The Biden-Harris administration's lack of enforcement of
the HFCAA was deeply troubling and cannot continue. This
inaction has effectively allowed Chinese companies to continue
trading on U.S. Exchanges without making the necessary
financial disclosures, potentially putting American investors
at risk.
As you await Senate confirmation of your nomination to
serve as the SEC Chairman, I seek your commitment to combat
Chinese companies' defiance of these financial disclosure and
reporting requirements, to fully enforce U.S. financial
accounting standards for all companies listed on our exchanges,
and to prioritize America's financial security.
Promoting the integrity of our financial markets must be
one of your top priorities. American investors deserve
protection, and all companies trading on our exchanges must be
held to the same standards of transparency and accountability.
I appreciate your prompt attention to this issue. I welcome
the opportunity to discuss your plans to fully enforce our laws
to protect U.S. investors and our domestic financial markets
following your confirmation.
Sincerely,
/s/
Rick Scott
United States Senator
cc: Acting U.S. Securities and Exchange Commission Chairman
Mark Uyeda
Public Company Accounting Oversight Board Chair Erica
Williams
[all]