Category: Operational Risk

As New York Unemployment Fraud Surges, Victims Want Help

Mary Pat Campbell

Link: https://www.governing.com/work/As-New-York-Unemployment-Fraud-Surges-Victims-Want-Help.html

Excerpt:

Many law enforcement agencies are continuing to see a high rate of identification-theft cases involving individuals whose personal information was illegally used to apply for unemployment benefits during the ongoing coronavirus pandemic.

Some of the recent cases are coming to light when individuals are receiving bank debit cards or paperwork in the mail indicating they were approved for federal pandemic unemployment assistance that they never applied for.

In other instances described by law enforcement officials, victims are learning they have been defrauded when they receive tax forms instructing them that the unemployment benefits they received last year are reportable income — although those individuals were not aware that someone had applied for or received the benefits using their identity. In some cases, multiple individuals from the same organizations — school districts, professional firms or government agencies — were victimized. That, according to law enforcement experts, could be tied to data breaches involving those entities.

Author(s): BRENDAN J. LYONS, TIMES UNION

Publication Date: 10 February 2021

Publication Site: Governing

Robinhood’s Reckoning: Facing Life After GameStop

Mary Pat Campbell

Link: https://www.wsj.com/articles/robinhoods-reckoning-can-it-survive-the-gamestop-bubble-11612547759?mod=djemwhatsnews

Excerpt:

Many startup founders dream of the day their creation claims the top spot in Apple Inc.’s app store. For Vlad Tenev, Robinhood Markets Inc.’s chief executive, it was more like a nightmare.

Mr. Tenev and his co-founder, Baiju Bhatt, had set out eight years earlier to bring the stock market to a new class of investors. With engineers plucked from Facebook Inc. and other tech giants, they stripped down the trading experience and eliminated commissions, making buying a share of stock about as easy as posting a photo on Instagram.

It worked. During the pandemic, throngs of amateur investors—homebound, bored and flush with stimulus checks—opened Robinhood accounts to experience the market’s thrills. By the end of December, the firm had amassed about 20 million users, according to people close to it, and weeks later its app hit the top of download charts.

Author(s): Peter Rudegeair, Kirsten Grind and Maureen Farrell

Publication Date: 5 February 2021

Publication Site: Wall Street Journal

GameStop Mania Is Focus of Federal Probes Into Possible Manipulation

Mary Pat Campbell

Link: https://www.wsj.com/articles/gamestop-mania-is-focus-of-federal-probes-into-possible-manipulation-11613066950?mod=djemwhatsnews

Excerpt:

The Justice Department’s fraud section and the San Francisco U.S. attorney’s office have sought information about the activity from brokers and social-media companies that were hubs for the trading frenzy, the people said. Prosecutors have subpoenaed information from brokers such as Robinhood Markets Inc., the popular online brokerage that many individual investors used to trade GameStop and other shares, the people said.

GameStop shares surged from about $20 to $483 over a period of two weeks in January. The stock has since fallen to around $50. It was fueled by an army of bullish individual traders exhorting one another on Reddit to buy the shares and squeeze hedge funds that bet the price would fall. Traders who bet stock prices will decline are known as short sellers.

Author(s): Dave Michaels

Publication Date: 11 February 2021

Publication Site: Wall Street Journal

Government investigating massive counterfeit N95 mask scam

Mary Pat Campbell

Link: https://apnews.com/article/government-investigation-n95-scam-1694ed85d6ef99cdb6662f67d823c271/

Excerpt:

Federal authorities are investigating a massive counterfeit N95 mask operation in which fake 3M masks were sold in at least five states to hospitals, medical facilities and government agencies. The foreign-made knockoffs are becoming increasingly difficult to spot and could put health care workers at grave risk for the coronavirus.

These masks are giving first responders “a false sense of security,” said Steve Francis, assistant director for global trade investigations with the Homeland Security Department’s principal investigative arm. He added, “We’ve seen a lot of fraud and other illegal activity.”

Author(s): Colleen Long

Publication Date: 10 February 2021

Publication Site: Associated Press

GameStop Mania Reveals Power Shift on Wall Street—and the Pros Are Reeling

Mary Pat Campbell

Link: https://www.wsj.com/articles/gamestop-mania-reveals-power-shift-on-wall-streetand-the-pros-are-reeling-11611774663?mod=djemwhatsnews

Excerpt:

Long-held strategies such as evaluating company fundamentals have gone out the window in favor of momentum. War has broken out between professionals losing billions and the individual investors jeering at them on social media. Meanwhile, the frenzy of activity is stirring regulatory and legal concerns, as well as the attention of the Biden administration. The White House press secretary said on Wednesday that its economic team, including Treasury Secretary Janet Yellen, is monitoring the situation.

The newbie investors are gathering on platforms such as Reddit, Discord, Facebook and Twitter . They are encouraging each other to pile into stocks, bragging about their gains and, at times, intentionally banding together to intensify losses among professional traders, who protest that social-media hordes are conspiring to move stock prices.

Author(s): Gunjan Banerji, Juliet Chung and Caitlin McCabe

Publication Date: 27 January 2021

Publication Site: Wall Street Journal

When Adobe Stopped Flash Content From Running It Also Stopped A Chinese Railroad

Mary Pat Campbell

Link: https://jalopnik.com/when-adobe-stopped-flash-content-from-running-it-also-s-1846109630

Excerpt:

Adobe’s Flash, the web browser plug-in that powered so very many crappy games, confusing interfaces, and animated icons of the early web like Homestar Runneris now finally gone, after a long, slow, protracted death. For most of us, this just means that some goofy webgame you searched for out of misplaced nostalgia will no longer run. For a select few in China, though, the death of Flash meant being late to work, because the city of Dalian in northern China was running their railroad system on it.Yes, a railroad, run on Flash, the same thing used to run “free online casinos” and knockoff Breakout games in mortgage re-fi ads.

….

The railroad’s technicians did get everything back up and running, but the way they did this is fascinating, too. They didn’t switch the rail management system to some other, more modern codebase or software installation; instead, they installed a pirated version of Flash that was still operational. The knockoff version seems to be known as “Ghost Version.”

Author(s): Jason Torchinsky

Publication Date: 22 January 2021

Publication Site: Jalopnik

People are fed up with broken vaccine appointment tools — so they’re building their own

Mary Pat Campbell

Link: https://www.technologyreview.com/2021/02/01/1016725/people-are-building-their-own-vaccine-appointment-tools/

Excerpt:

That very day, January 2, Craver worked from 3 in the afternoon until 11:30 at night to create Covid19 Vaccine TX, a site listing possible vaccination locations across the state. As a digital product designer, she knew that a site like this would have to be easy to read, intuitive to navigate, and quick to update. The idea was that people could upload information about vaccination sites, with each entry answering three questions: Was the vaccine available that day? Was the location taking appointments? Was there a wait list?

Craver loaded the project on the cloud-based spreadsheet service Airtable, posted a link on Reddit, and went to bed. When she woke up the next morning at 7 a.m., one entry was filled out. “At least somebody cares,” she remembers thinking. She spent the rest of the day manually inserting information for about 1,400 locations in the state. “I’ve been going nonstop since,” she says, estimating that she puts in about 40 hours of her free time every week to maintain the site. It has received 50,000 total visitors since launch.

Author(s): Tanya Basu

Publication Date: 1 February 2021

Publication Site: MIT Technology Review

Public Health Systems Still Aren’t Ready for the Next Pandemic

Mary Pat Campbell

Link: https://www.governing.com/next/Public-Health-Systems-Still-Arent-Ready-for-the-Next-Pandemic.html

Excerpt:

Like public health officials everywhere, Dr. Jeffrey Duchin marvels at the miraculous production of highly effective vaccines against COVID-19 in mere months.

But Duchin, head of public health in Seattle and King County, Washington, doesn’t dwell on the only triumph of the pandemic response. Instead, he quickly pivots to the huge deficiencies plaguing the rollout of those lifesaving injections.

The lack of planning and coordination. The insufficient workforce and training. The inadequate public messaging and outreach. And the failure to create a uniform database to track inventory and equitably distribute shots.

“We’re seeing the consequences now of a complete and utter failure to ensure we have a full and robust vaccination system,” Duchin said. The chaotic execution of state and local vaccination programs is only the latest in a series of missteps by public health departments during the worst pandemic in more than a century. They include lackluster testing, contact tracing and data collection, and the failure to protect minority communities, which have borne the brunt of this disease.

Author(s): MICHAEL OLLOVE AND CHRISTINE VESTAL

Publication Date: 1 February 2021

Publication Site: Governing

Buy or sell: GameStop frenzy has Washington teasing action on Reddit vs. Wall Street

Mary Pat Campbell

Link: https://www.nbcnews.com/politics/politics-news/buy-or-sell-gamestop-frenzy-has-washington-teasing-action-reddit-n1256142

Excerpt:

A number of Democrats and Republicans united in opposition this week to the strict limits imposed by Robinhood and other online stock brokerages on the purchasing of GameStop and other stocks swept up in a Reddit-fueled trading frenzy.

Disparate members of Congress like Alexandria Ocasio-Cortez, D-N.Y., Ro Khanna, D-Calif., Ted Lieu, D-Calif., Ken Buck, R-Colo., and Sens. Pat Toomey, R-Pa. and Ted Cruz, R-Texas, were among those who criticized the move, with many calling for hearings that Democratic leaders say will soon take place in both the House and Senate as what began as an internet movement continues to roil Wall Street.

Lawmakers trained attention on the volatility surrounding GameStop’s stock as several others this week. The stock climbed from $4 only a few months ago to more than $400 this week, juiced by an online movement not dissimilar to others that have broadly altered the political landscape in recent years. At the same time, hedge funds that made large bets on GameStop’s stock cratering — known as “shorting” — began to pile up big losses. Then the brokerages instituted limits, leading to charges of collusion with the larger financial entities facing big losses.

Author(s): Allan Smith

Publication Date: 29 January 2021

Publication Site: NBC News

Why Brokers Had to Restrain Trading in GameStop Shares

Mary Pat Campbell

Link: https://www.wsj.com/articles/why-brokers-had-to-restrain-trading-in-gamestop-shares-11612201242

Excerpt:

When clients trade, especially on margin, they use the broker’s money to play. Imagine a client buys 100 shares of GameStop for $400 a share, using $20,000 of his own money and borrowing $20,000 from Robinhood. If the stock drops from $400 to $120 (as it did on Jan. 28), the client’s position may be sold for $12,000 due to the margin violation, leaving Robinhood trying to collect an unsecured $8,000 debt. Good luck. Multiply this by hundreds or thousands of similar clients. Option trading is worse because the leverage is much greater.

The broker’s risk is asymmetrical: If half its clients are winning big by buying during a short squeeze, while its short clients are suffering losses they can’t pay, the broker can’t offset these gains and losses, but must pay the winning clients while possibly eating the losing trades. It is rare, but brokers go bankrupt during market events like this.

Brokers therefore are subject to strict financial requirements, including that they maintain large security deposits at the clearinghouses. When risk rises, clearinghouses raise their requirements, even intraday. On Jan. 28, when GameStop dropped from $483 to $112, the clearinghouse DTCC raised requirements by an aggregate $7.5 billion. Brokers had to post that money to DTCC whether or not their clients had it.

Author(s): David Battan

Publication Date: 1 February 2021

Publication Site: Wall Street Journal

Let the GameStop Games Begin!

Mary Pat Campbell
Let the GameStop Games Begin!

Graphic:

Excerpt:

That chart ends at yesterday’s close. Things have been even more crazy overnight, with the price hitting $500/share. There have been gyrations caused by the shutdown of the chatrooms and some retail platforms stopping trading in this and other heavily shorted stocks. But the fundamental dynamic in play now–shorts slitting their own throats in panicked buying to cover–means that attempts to constrain the long herd will not have a lasting impact.

The short interest that had to (and has to) be covered is huge–short interest in GME was 140 percent of outstanding shares–and a larger share of the float. (How can there be more shorts than shares? The same share can be borrowed and lent multiple times!) The effects of the short covering are seen not only in the price, but in the stratospheric cost of borrowing shares. Earlier this week it was about 30 percent–juice loan territory. Now it is at 100 percent.

In many respects, this is reminiscent of some of the more storied episodes in Wall Street history, or more recently the 2008 VW corner which punished shorts severely. But there is a major difference. In some of the earlier episodes (including major corners of shorts in railroad stocks in the 19th century, or battles between shorts and stock pools in the 1920s, or the VW case), there was a single dominant long squeezing the overextended shorts. Here, it seems that the driving force is a relatively large group of small longs, acting with a common purpose.

Author(s): Craig Pirrong

Publication Date: 28 January 2021

Publication Site: Streetwise Professor

The Insiders’ Game

Mary Pat Campbell

Link: https://www.persuasion.community/p/the-insiders-game

Excerpt:

First, the digital distribution platform Discord banned the WallStreetBets account after the close Wednesday for “hate speech, glorifying violence, and spreading misinformation.” (For a moment, it looked like Reddit had also banned the group, but they resisted pressure to do so.) If the quoted justification sounds familiar, it’s nearly identical to the one given by Google, Apple, and Amazon for deplatforming Parler just three weeks earlier. Echoing Amazon, Discord said it had sent the group repeated warnings about objectionable content before deciding, on that day of all days, to shut them down. 

Meanwhile, WallStreetBets investors were locked out of their trading accounts by online brokers such as Robinhood on Thursday morning. Based on new collateral requirements that it says were imposed by an industry consortium, Robinhood forbade its users from buying GameStop and other stocks that WallStreetBets had identified as short squeeze opportunities. Users were allowed only to “close their positions”—in other words, to sell to the shorts desperate to buy. When angry users registered their disapproval by leaving over 100,000 one-star reviews of the Robinhood app in the Google Play Store, Google deleted them. 

Author(s): David Sacks

Publication Date: 1 February 2021

Publication Site: Persuasion