Value Melt
In today’s newsletter, we’re digging into one scam, split up into a few parts.
The Hook
Quartz journalists Jeremy B. Merrill and Hanna Kozlowska dropped a series of investigative pieces this month, exposing an ongoing scam targeting conservative seniors on Facebook.
Millions of dollars worth of retirement-themed ads from pages like “Retired Republicans” and “Fox News Insiders” ran on Facebook throughout the past two years. The ads were microtargeted to conservative seniors. They seemly were designed to scare users into “protecting” their future by purchasing precious metals. Some asked, “Is Your Retirement Protected from the Deep State?”
In the end, some seniors were tricked out of much of their retirement savings—and Facebook showed ads supporting the scheme at least 45 million times.
The company behind the scam used fear and paranoia to trick people into “investing” in their precious metal coins, which they sold at huge mark-ups, liquidating tens of millions of dollars worth of seniors’ retirement savings.
Their tactics worked because the marketing pitch the company used borrowed the same conspiracy theory language conservative seniors have spent years consuming on right-wing talk radio and cable TV.
It was important to get potential investors to connect with and trust them. Customers had to be conservative, with little faith in the government or the economy. “If someone says they’re liberal or they don’t like Hannity, you just hang up,” said the former salesperson.
The company and its salespeople also pretended to be directly affiliated with Fox News and its personalities.
One such script shown to Quartz began, “I’m part of a conservative team… we help Fox News / Hannity / Limbaugh / Levin.”
Fox News says it is now exploring legal action against the company, though it has little control over what is shown on Facebook.
They strategized ways to scare victims into using their retirement money to buy overpriced coins.
“If a prospect disagrees with you it’s not really a winnable narrative (because nobody knows). Stick with Jim Rickards [an advocate for investing in gold], Debt Bomb, Chinese Kill Switch, Illegal immigration, DEEP STATE, ICE-9, fedcoin narrative because the President of the United States is your source and it’s proven to move capital,” [Asher] writes, referring to obscure right-wing financial theories about a collapse in the value of US currency.
I won’t go into all of the conspiracy theories listed above, but feel free to Google some of them if you don’t value your sanity. At every juncture, the aggressive sale tactics employed by Metals.com and its employees stoked fear. It’s notably different from other types of investment scams, which FOMO and rely on their target’s greed to acquire more money from their investments. With precious metal schemes, the targets are meant to be afraid of losing what they have, and are convinced that the only way to protect their money is to buy whatever the scammer is selling.
Whatever you may think of bullion investing, it is a legitimate investment vehicle covered by various securities laws. However, what Metals.com was selling seniors were coins that contained some amount of precious metal.
The coins that precious metals retailers often sell are “gold bullion coins with a fancy wrapper and name and serial numbers,” said Adam Radinsky, Santa Monica’s chief deputy city attorney, who investigated Goldline. “These coins are not worth much, if anything, beyond bullion,” he said. “But they can be touted as if they are.”
Metals.com would sell what they claimed were rare or valuable coins at a 100 to 200% markup over their “melt value”, or the value of the actual bullion contained in the coin. They added a veneer of authenticity to the transaction, by having their victims move money into IRA accounts, which they used to purchase the coins. The downside to this aspect of the scam was that it allowed the victims to see just how much they’d lost.
When she checked her IRA balance online, she said, it turned out that instead of the $83,000 she expected to have, her holdings were worth less than a third of that. That’s because the price of the coins she purchased was far higher than the value of the precious metal they contained.
The stories from the seniors who fell victim to this company are heartbreaking. Salespeople, preying on their fear of financial insecurity in their later years, stole hundreds of thousands of dollars from them. What kind of person could bring themselves to rip off seniors for a living?
The Players
Say hello to Lucas Asher and his partner Simon Batashvili. It’s easy to single them out as the villains, but their scam might have been impossible without the folks at Facebook, who created the perfect ad platform for them to run their scheme.
Ah, let’s single them out anyhow. Asher is an incredible tool, who got his start working for (and stealing from) another bullion scam company before he set out on his own:
Asher has more than 233,000 followers on Instagram, where he posts a mix of typical influencer fare, like sunsets and exotic locales, side-by-side with portraits of him in front of a raging fire. One, in which he wields a military-style weapon, is captioned: “Our thoughts, if directed and aligned, in the right frequency, are like this RPG missile. 🚀” In another photo, he perches on a luxury sports car, with a caption saying: “Choosing money over consciousness is like choosing dirt over gold.”
Which is…the investment advice he gave seniors??
Asher’s online philosophical musings often refer to the “Omertà Cortex,” which its website says is a “code of consciousness,” and a group of “consciousness pirates,”
Extremely bad ass. He’s such a consciousness pirate that he’s allegedly used half a dozen fake names in his various schemes, including while talking to Quartz reporters for the piece.
Their office group chats were predictably douchey.
One employee even shared a meme from TheWolf of Wall Street in which Leonardo DiCaprio, as Belfort, is throwing money into the air. There is talk of red Ferraris, of “intercepting money,” and quotes from Glengarry Glen Ross, another movie that is an indictment of predatory sales tactics.
Wolf of Wall Street has replaced Glengarry Glen Ross as the go-to meme for capitalist bullshittery, and while I’m pleased that we may eventually return to seeing GGR as what it was intended to be - a critique of capitalism and the mirage of the American Dream - I wish I could remind everyone that the guy from Wolf of Wall Street went to jail for a massive fraud, did not pay back most of what he stole, and then went on to personally profit from a highly fictionalized movie about his life FUNDED BY THE 1MDB CROOK JHO LOW- okay I’m sorry, the people preparing Thanksgiving dinner as I write this are starting to look at me funny. Anyhow!
The office had, and I cannot make this up, a “cash grab” machine employees would be permitted to use when they bilked enough grandparents out of their pensions:
…the office had “cash grabs,” which involved a version of a machine, known from TV game shows, that blows bills around for contestants to grab; a salesperson who met special sales targets would stick their hand inside Metals.com’s miniature device to grab as many bills as possible.
So we have Asher and his crew of awfuls, we have Facebook who let them run these ads for years and pocket tens of millions of dollars, we have a couple intrepid journalists who stumbled upon this story while looking through the Facebook ad archive, who else we got?
Attorneys general! One of the most frustrating bits of writing this newsletter and reading about scams more generally is that many of these companies and scammers are repeat offenders, known to authorities, and there doesn’t seem to be much that anyone can do about it?
Even though Metals.com has customers across the country who lost money, there’s no known federal effort to go after the company.
Since May, however, several state securities commissioners have accused Metals.com of fraud or illegally offering investment advice without being registered to do so. But state officials’ tools can be somewhat limited, forcing them to rely on state securities regulations.
Despite this, companies can get around state-level penalties by simply not advertising to people in states they’ve settled with. And, most importantly:
None of the state regulatory actions have led to criminal charges.
I am most certainly not a lawyer, but one of the ways companies like Metals.com are able to skate on these technicalities is that the cases become a he-said she-said, with victims of the fraud claiming they were deceived and companies claiming they got right up to the line of deceptive practices but never quite stepped over it. Metals.com was able to claim that they had a “rogue” employee who violated laws, and regulators bought the excuse.
We’ve talked, in the past, about how Facebook’s algorithms make it easy for fraudsters to target especially susceptible audiences. Metals.com sought out people over 60 who were fans of Fox News personalities, and had interests making them more likely to distrust the government.
Facebook, when asked, trotted out excuses.
“These kinds of deceptive ads have no place on Facebook,” Facebook’s director of product management Rob Leathern told Quartz in an emailed statement. “Over the past year we have removed pages and their associated ad accounts, but the people behind these ads continue to intentionally break our rules,” he said.
[…]
“The people behind these violating ads are constantly adapting to get around our systems, which is why we continue to improve,” said Leathern, of Facebook.
Facebook is admitting it knows about the problem, acknowledging that these are repeat offenders, and…doing nothing about it? I asked Jeremy Merrill about this, and his frustration mirrors my own.
I'm genuinely confused why these sorts of things weren't caught by Facebook on its own. It's in plain sight! One of the aliases, Webinar Technologies, [was] in the top 20 advertisers right after the 2018 election. Why no one with access to Facebook's full suite of private data didn't look into it, I don't know.
Again, journalists are doing Facebook’s job for them. By having a self-serve ad platform anyone can use to advertise anything, Facebook manages to both create the tools fraudsters use to rip people off and absolve itself from all responsibility by claiming they’re simply not clever enough to spot the scams on their platform.
The Investigators (an Interview!)
Jeremy Merrill explained to me how he came upon Asher and his schemes:
Last year, when I was running a transparency project around political Facebook ads, I saw a handful of Facebook ads that just set off my Scooby sense. Usually with ads you can figure out who benefits, whether that's a candidate, a party or even a sketchy influence group. But with these ads, it wasn't clear. And that was weird. But it took me a while to figure it out who was actually behind them.
In most of the stories I write about, it takes a journalist alerting Facebook or Google to the scams before they take any sort of action. Journalists are forced to depend on tips or stumbling across a story, since Facebook’s targeting tools can hide these schemes from the general public. Some groups have created crowdsourced tools to hold tech companies accountable.
Crowdsourced data is essential to unraveling misbehavior on the platforms; Quartz participates in a project called the Facebook Political Ad Collector that's run by The Globe and Mail newspaper in Toronto, Canada. (We need your help! Please consider installing it at tgam.ca/fbpac) The platforms' transparency site simply don't provide the information that we need. For instance, Facebook's transparency platform still doesn't disclose how an advertiser chose to target their ad. Almost all of the ads in the story were targeted exclusively to people 59 and older. You wouldn't be able to see that -- or to use that commonality to find other ads in the same cluster -- without third party tools. Even though the crowdsourcing project has repeatedly exposed massive violations of Facebook's rules... they're not happy that it exists.
Earlier this year, Facebook tried to block ProPublica’s tool when Merrill still worked there. There are other steps they could take, he thinks, though they do not appear to be closer to doing so at this time.
Facebook's efforts so far should be evaluated on the basis of whether multimillion dollar scam efforts are getting stopped by Facebook or caught after the fact by external actors like state regulators or journalists. Can you imagine taking millions of dollars from someone without knowing who they are or what they're doing? That literally describes Facebook here. Academics have proposed a variety of solutions including (a) banking-style Know Your Customer requirements (b) stricter investigation of advertisers who target ads to potentially vulnerable groups like seniors (c) stricter investigation of all new advertisers or (d) more serious AI to find new variations on old scams.
Here’s hoping that recent scrutiny of Facebook pushes them to take more aggressive steps to curtail the rampant fraud on their advertising platform. I remain skeptical.
I asked Merrill what it was like to report a story like this, since the victims are real people and it’s important not to forget the human impact of these scams:
There was a lot of shame and sadness from the seniors who purchased gold and silver from Metals.com. It was tough hearing that. Like several of the regulators said, older folks who've been the victim of scams often don't want to talk about it, because it's embarrassing. But these folks were also very brave, in speaking up for what's right against a scary company.
I couldn’t write my silly newsletter without reporters like Merrill, and I’m glad outlets like Quartz, Buzzfeed News, and ProPublica exist and are willing to hold the tech companies’ feet to the fire.
Small Cons
My Federal Retirement - “The Social Security Administration (SSA) announced Tuesday the launch of a dedicated online form to receive reports from the public of Social Security-related scams.” (tell your older relatives!)
CTV News - “A gift exchange called “Secret Sister” that has spread through social media is actually just a gift-wrapped pyramid scheme, according to the Better Business Bureau.”
Justice Dot Gov - “A Russian national made his initial appearance in federal court today on charges related to his alleged operation of two websites devoted to the facilitation of payment card fraud, computer hacking, and other crimes.”
Happy Thanksgiving to my American readers, happy Friday to my non-American readers, and a big thank you to Jeremy Merrill for taking time to answer my dumb questions about what it’s like to be a real journalist. Tips to scammerdarkly@gmail.com