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How a $1.8 Billion Indian Bank Fraud Lasted Seven Years

The story of how India’s biggest bank fraud went undetected for seven years includes an $81 million cyber-heist in neighboring Bangladesh, penny-pinching lenders and a series of missed opportunities.

In 2016, after revelations that hackers had infiltrated the Bangladeshi central bank’s computer systems to siphon off money, its counterpart in India sensed a danger to its own banking system. The Reserve Bank of India reminded all the country’s lenders to ensure their computer networks were properly integrated with Swift, the global system used to transmit payment instructions in the Bangladesh theft.

Unknown to the RBI at the time, a rogue employee at state-owned Punjab National Bank had allegedly been taking advantage of precisely that flaw in the Indian lender’s computer systems for five years, perpetuating a fraud that would eventually balloon to $1.8 billion, according to PNB’s account.

“The biggest thing that didn’t happen was the linkage between Swift and the bank’s back-end software — they didn’t talk,” said Abizer Diwanji, a financial services partner in India at the accountancy firm EY. “The ball was first dropped” when PNB missed a chance to reconcile the two systems, he said.

As the fallout from the incident spreads and various government agencies move to investigate, one thing stands clear: the financial damage was exacerbated by a combination of inferior technology, weak risk management and insufficient regulatory oversight. Had the fraud been discovered a year earlier, the total amount would have been about $800 million lower.


PNB alleges its former employee Gokulnath Shetty provided billionaire jeweler Nirav Modi and his associates with guarantees to obtain loans from abroad. Between 2011 and early 2017, guarantees worth 65 billion rupees ($1 billion) were issued without any collateral, followed by another 49 billion rupees over March to May last year, when Shetty retired, according PNB’s complaint that has been made public.

To read about the modus operandi behind the fraud, click here

Because the computer systems of many Indian banks weren’t compatible with Swift, the RBI didn’t make it a requirement to integrate the two, according to R. Gandhi, a former RBI deputy governor who oversaw the central bank’s risk operations at the time of the Bangladesh hack. However, banks like PNB that hadn’t integrated their systems were required instead to perform daily manual checks to reconcile the Swift messages with internal records, Gandhi added.

Given the prevalence of fraud involving global trade finance transactions, it’s critical for banks to ensure automated or manual reconciliation with Swift, said Tim Phillipps, an Asia-Pacific financial crime specialist at Deloitte. It isn’t hard to build an interface between Swift and the bank’s own software, he said.


“Trade finance operations at banks are one of the riskiest parts of the business they do and also one of the most profitable,” Phillipps said. “Most checks in world structured environments don’t allow data to be entered directly into Swift because that is where many of the big problems have occurred over the past decade in terms of falsifying information.”

Cost may have been a factor in preventing Indian banks from upgrading their systems, according to Saswata Guha, a director in the financial institutions group at Fitch Ratings. Indian lenders have been grappling with rising bad loans and insufficient capital for years, a situation that may worsen after new regulations take effect in coming months.

Road to Discovery

These four months played a key role in discovering India's biggest bank fraud

Source: Documents seen by Bloomberg, PNB complaint to investigators, PNB filings to exchanges

For a more detailed timeline of events, click here

The RBI didn’t reply to an email sent early Tuesday seeking detail on its warnings about Swift, but late that evening it posted a statement on its website saying it had confidentially cautioned banks about misuse of Swift on at least three occasions since August 2016. “Banks have, however, been at varying levels in implementation of such measures,” the RBI said.

‘Down to Its Heels’

Federal officials have arrested Shetty, who couldn’t be reached for comment. PNB didn’t reply to emails seeking comment. Swift doesn’t comment on particular allegations and customers, spokeswoman Natasha de Teran said by email on Tuesday.

All of Modi’s transactions with PNB were documented and Modi denies allegations he was involved in the fraud, Modi’s lawyer Vijay Aggarwal told NDTV on Tuesday. Modi’s office didn’t reply to a Bloomberg email seeking comment.

Finance Minister Arun Jaitley on Tuesday said supervisors and auditors must ensure that frauds are detected early. His ministry is said to have sought a reply from the RBI on whether it found any wrongdoing while inspecting PNB’s account books. The 10-member Bankex index rose 0.3 percent in Mumbai on Wednesday, snapping a three-day drop, as the main equity gauge advanced 0.4 percent.

While India’s government and central bank have been setting up panels and making recommendations for years to reform the nation’s banking sector, real progress has been slow, said Fitch’s Guha.

“If a few people, or connivance of a group of people, can take a bank this large down to its heels with the kind of capital market implications one has been seeing, then it poses very serious questions,” he said. “At the core of it, it’s really governance.”

    Read more: http://www.bloomberg.com/news/articles/2018-02-21/how-an-1-8-billion-indian-bank-fraud-lasted-seven-years

    Inside the Two Years That Shook Facebookand the World

    One day in late February of 2016, Mark Zuckerberg sent a memo to all of Facebook’s employees to address some troubling behavior in the ranks. His message pertained to some walls at the company’s Menlo Park headquarters where staffers are encouraged to scribble notes and signatures. On at least a couple of occasions, someone had crossed out the words “Black Lives Matter” and replaced them with “All Lives Matter.” Zuckerberg wanted whoever was responsible to cut it out.

    “ ‘Black Lives Matter’ doesn’t mean other lives don’t,” he wrote. “We’ve never had rules around what people can write on our walls,” the memo went on. But “crossing out something means silencing speech, or that one person’s speech is more important than another’s.” The defacement, he said, was being investigated.

    All around the country at about this time, debates about race and politics were becoming increasingly raw. Donald Trump had just won the South Carolina primary, lashed out at the Pope over immigration, and earned the enthusiastic support of David Duke. Hillary Clinton had just defeated Bernie Sanders in Nevada, only to have an activist from Black Lives Matter interrupt a speech of hers to protest racially charged statements she’d made two decades before. And on Facebook, a popular group called Blacktivist was gaining traction by blasting out messages like “American economy and power were built on forced migration and torture.”

    So when Zuckerberg’s admonition circulated, a young contract employee named Benjamin Fearnow decided it might be newsworthy. He took a screenshot on his personal laptop and sent the image to a friend named Michael Nuñez, who worked at the tech-news site Gizmodo. Nuñez promptly published a brief story about Zuckerberg’s memo.

    A week later, Fearnow came across something else he thought Nuñez might like to publish. In another internal communication, Facebook had invited its employees to submit potential questions to ask Zuckerberg at an all-hands meeting. One of the most up-voted questions that week was “What responsibility does Facebook have to help prevent President Trump in 2017?” Fearnow took another screenshot, this time with his phone.

    Fearnow, a recent graduate of the Columbia Journalism School, worked in Facebook’s New York office on something called Trending Topics, a feed of popular news subjects that popped up when people opened Facebook. The feed was generated by an algorithm but moderated by a team of about 25 people with backgrounds in journalism. If the word “Trump” was trending, as it often was, they used their news judgment to identify which bit of news about the candidate was most important. If The Onion or a hoax site published a spoof that went viral, they had to keep that out. If something like a mass shooting happened, and Facebook’s algorithm was slow to pick up on it, they would inject a story about it into the feed.

    March 2018. Subscribe to WIRED.

    Jake Rowland/Esto

    Facebook prides itself on being a place where people love to work. But Fearnow and his team weren’t the happiest lot. They were contract employees hired through a company called BCforward, and every day was full of little reminders that they weren’t really part of Facebook. Plus, the young journalists knew their jobs were doomed from the start. Tech companies, for the most part, prefer to have as little as possible done by humans—because, it’s often said, they don’t scale. You can’t hire a billion of them, and they prove meddlesome in ways that algorithms don’t. They need bathroom breaks and health insurance, and the most annoying of them sometimes talk to the press. Eventually, everyone assumed, Facebook’s algorithms would be good enough to run the whole project, and the people on Fearnow’s team—who served partly to train those algorithms—would be expendable.

    The day after Fearnow took that second screenshot was a Friday. When he woke up after sleeping in, he noticed that he had about 30 meeting notifications from Facebook on his phone. When he replied to say it was his day off, he recalls, he was nonetheless asked to be available in 10 minutes. Soon he was on a video­conference with three Facebook employees, including Sonya Ahuja, the company’s head of investigations. According to his recounting of the meeting, she asked him if he had been in touch with Nuñez. He denied that he had been. Then she told him that she had their messages on Gchat, which Fearnow had assumed weren’t accessible to Facebook. He was fired. “Please shut your laptop and don’t reopen it,” she instructed him.

    That same day, Ahuja had another conversation with a second employee at Trending Topics named Ryan Villarreal. Several years before, he and Fearnow had shared an apartment with Nuñez. Villarreal said he hadn’t taken any screenshots, and he certainly hadn’t leaked them. But he had clicked “like” on the story about Black Lives Matter, and he was friends with Nuñez on Facebook. “Do you think leaks are bad?” Ahuja demanded to know, according to Villarreal. He was fired too. The last he heard from his employer was in a letter from BCforward. The company had given him $15 to cover expenses, and it wanted the money back.

    The firing of Fearnow and Villarreal set the Trending Topics team on edge—and Nuñez kept digging for dirt. He soon published a story about the internal poll showing Facebookers’ interest in fending off Trump. Then, in early May, he published an article based on conversations with yet a third former Trending Topics employee, under the blaring headline “Former Facebook Workers: We Routinely Suppressed Conservative News.” The piece suggested that Facebook’s Trending team worked like a Fox News fever dream, with a bunch of biased curators “injecting” liberal stories and “blacklisting” conservative ones. Within a few hours the piece popped onto half a dozen highly trafficked tech and politics websites, including Drudge Report and Breitbart News.

    The post went viral, but the ensuing battle over Trending Topics did more than just dominate a few news cycles. In ways that are only fully visible now, it set the stage for the most tumultuous two years of Facebook’s existence—triggering a chain of events that would distract and confuse the company while larger disasters began to engulf it.

    This is the story of those two years, as they played out inside and around the company. WIRED spoke with 51 current or former Facebook employees for this article, many of whom did not want their names used, for reasons anyone familiar with the story of Fearnow and Villarreal would surely understand. (One current employee asked that a WIRED reporter turn off his phone so the company would have a harder time tracking whether it had been near the phones of anyone from Facebook.)

    The stories varied, but most people told the same basic tale: of a company, and a CEO, whose techno-optimism has been crushed as they’ve learned the myriad ways their platform can be used for ill. Of an election that shocked Facebook, even as its fallout put the company under siege. Of a series of external threats, defensive internal calculations, and false starts that delayed Facebook’s reckoning with its impact on global affairs and its users’ minds. And—in the tale’s final chapters—of the company’s earnest attempt to redeem itself.

    In that saga, Fearnow plays one of those obscure but crucial roles that history occasionally hands out. He’s the Franz Ferdinand of Facebook—or maybe he’s more like the archduke’s hapless young assassin. Either way, in the rolling disaster that has enveloped Facebook since early 2016, Fearnow’s leaks probably ought to go down as the screenshots heard round the world.


    By now, the story of Facebook’s all-consuming growth is practically the creation myth of our information era. What began as a way to connect with your friends at Harvard became a way to connect with people at other elite schools, then at all schools, and then everywhere. After that, your Facebook login became a way to log on to other internet sites. Its Messenger app started competing with email and texting. It became the place where you told people you were safe after an earthquake. In some countries like the Philippines, it effectively is the internet.

    The furious energy of this big bang emanated, in large part, from a brilliant and simple insight. Humans are social animals. But the internet is a cesspool. That scares people away from identifying themselves and putting personal details online. Solve that problem—make people feel safe to post—and they will share obsessively. Make the resulting database of privately shared information and personal connections available to advertisers, and that platform will become one of the most important media technologies of the early 21st century.

    But as powerful as that original insight was, Facebook’s expansion has also been driven by sheer brawn. Zuckerberg has been a determined, even ruthless, steward of the company’s manifest destiny, with an uncanny knack for placing the right bets. In the company’s early days, “move fast and break things” wasn’t just a piece of advice to his developers; it was a philosophy that served to resolve countless delicate trade-offs—many of them involving user privacy—in ways that best favored the platform’s growth. And when it comes to competitors, Zuckerberg has been relentless in either acquiring or sinking any challengers that seem to have the wind at their backs.

    Facebook’s Reckoning

    Two years that forced the platform to change

    by Blanca Myers

    March 2016

    Facebook suspends Benjamin Fearnow, a journalist-­curator for the platform’s Trending Topics feed, after he leaks to Gizmodo.

    May 2016

    Gizmodo reports that Trending Topics “routinely suppressed conservative news.” The story sends Facebook scrambling.

    July 2016

    Rupert Murdoch tells Zuckerberg that Facebook is wreaking havoc on the news industry and threatens to cause trouble.

    August 2016

    Facebook cuts loose all of its Trending Topics journalists, ceding authority over the feed to engineers in Seattle.

    November 2016

    Donald Trump wins. Zuckerberg says it’s “pretty crazy” to think fake news on Facebook helped tip the election.

    December 2016

    Facebook declares war on fake news, hires CNN alum Campbell Brown to shepherd relations with the publishing industry.

    September 2017

    Facebook announces that a Russian group paid $100,000 for roughly 3,000 ads aimed at US voters.

    October 2017

    Researcher Jonathan Albright reveals that posts from six Russian propaganda accounts were shared 340 million times.

    November 2017

    Facebook general counsel Colin Stretch gets pummeled during congressional Intelligence Committee hearings.

    January 2018

    Facebook begins announcing major changes, aimed to ensure that time on the platform will be “time well spent.”

    In fact, it was in besting just such a rival that Facebook came to dominate how we discover and consume news. Back in 2012, the most exciting social network for distributing news online wasn’t Facebook, it was Twitter. The latter’s 140-character posts accelerated the speed at which news could spread, allowing its influence in the news industry to grow much faster than Facebook’s. “Twitter was this massive, massive threat,” says a former Facebook executive heavily involved in the decisionmaking at the time.

    So Zuckerberg pursued a strategy he has often deployed against competitors he cannot buy: He copied, then crushed. He adjusted Facebook’s News Feed to fully incorporate news (despite its name, the feed was originally tilted toward personal news) and adjusted the product so that it showed author bylines and headlines. Then Facebook’s emissaries fanned out to talk with journalists and explain how to best reach readers through the platform. By the end of 2013, Facebook had doubled its share of traffic to news sites and had started to push Twitter into a decline. By the middle of 2015, it had surpassed Google as the leader in referring readers to publisher sites and was now referring 13 times as many readers to news publishers as Twitter. That year, Facebook launched Instant Articles, offering publishers the chance to publish directly on the platform. Posts would load faster and look sharper if they agreed, but the publishers would give up an element of control over the content. The publishing industry, which had been reeling for years, largely assented. Facebook now effectively owned the news. “If you could reproduce Twitter inside of Facebook, why would you go to Twitter?” says the former executive. “What they are doing to Snapchat now, they did to Twitter back then.”

    It appears that Facebook did not, however, carefully think through the implications of becoming the dominant force in the news industry. Everyone in management cared about quality and accuracy, and they had set up rules, for example, to eliminate pornography and protect copyright. But Facebook hired few journalists and spent little time discussing the big questions that bedevil the media industry. What is fair? What is a fact? How do you signal the difference between news, analysis, satire, and opinion? Facebook has long seemed to think it has immunity from those debates because it is just a technology company—one that has built a “platform for all ideas.”

    This notion that Facebook is an open, neutral platform is almost like a religious tenet inside the company. When new recruits come in, they are treated to an orientation lecture by Chris Cox, the company’s chief product officer, who tells them Facebook is an entirely new communications platform for the 21st century, as the telephone was for the 20th. But if anyone inside Facebook is unconvinced by religion, there is also Section 230 of the 1996 Communications Decency Act to recommend the idea. This is the section of US law that shelters internet intermediaries from liability for the content their users post. If Facebook were to start creating or editing content on its platform, it would risk losing that immunity—and it’s hard to imagine how Facebook could exist if it were liable for the many billion pieces of content a day that users post on its site.

    And so, because of the company’s self-image, as well as its fear of regulation, Facebook tried never to favor one kind of news content over another. But neutrality is a choice in itself. For instance, Facebook decided to present every piece of content that appeared on News Feed—whether it was your dog pictures or a news story—in roughly the same way. This meant that all news stories looked roughly the same as each other, too, whether they were investigations in The Washington Post, gossip in the New York Post, or flat-out lies in the Denver Guardian, an entirely bogus newspaper. Facebook argued that this democratized information. You saw what your friends wanted you to see, not what some editor in a Times Square tower chose. But it’s hard to argue that this wasn’t an editorial decision. It may be one of the biggest ever made.

    In any case, Facebook’s move into news set off yet another explosion of ways that people could connect. Now Facebook was the place where publications could connect with their readers—and also where Macedonian teenagers could connect with voters in America, and operatives in Saint Petersburg could connect with audiences of their own choosing in a way that no one at the company had ever seen before.


    In February of 2016, just as the Trending Topics fiasco was building up steam, Roger ­McNamee became one of the first Facebook insiders to notice strange things happening on the platform. McNamee was an early investor in Facebook who had mentored Zuckerberg through two crucial decisions: to turn down Yahoo’s offer of $1 billion to acquire Facebook in 2006; and to hire a Google executive named Sheryl Sandberg in 2008 to help find a business model. McNamee was no longer in touch with Zuckerberg much, but he was still an investor, and that month he started seeing things related to the Bernie Sanders campaign that worried him. “I’m observing memes ostensibly coming out of a Facebook group associated with the Sanders campaign that couldn’t possibly have been from the Sanders campaign,” he recalls, “and yet they were organized and spreading in such a way that suggested somebody had a budget. And I’m sitting there thinking, ‘That’s really weird. I mean, that’s not good.’ ”

    But McNamee didn’t say anything to anyone at Facebook—at least not yet. And the company itself was not picking up on any such worrying signals, save for one blip on its radar: In early 2016, its security team noticed an uptick in Russian actors attempting to steal the credentials of journalists and public figures. Facebook reported this to the FBI. But the company says it never heard back from the government, and that was that.

    Instead, Facebook spent the spring of 2016 very busily fending off accusations that it might influence the elections in a completely different way. When Gizmodo published its story about political bias on the Trending Topics team in May, the ­article went off like a bomb in Menlo Park. It quickly reached millions of readers and, in a delicious irony, appeared in the Trending Topics module itself. But the bad press wasn’t what really rattled Facebook—it was the letter from John Thune, a Republican US senator from South Dakota, that followed the story’s publication. Thune chairs the Senate Commerce Committee, which in turn oversees the Federal Trade Commission, an agency that has been especially active in investigating Facebook. The senator wanted Facebook’s answers to the allegations of bias, and he wanted them promptly.

    The Thune letter put Facebook on high alert. The company promptly dispatched senior Washington staffers to meet with Thune’s team. Then it sent him a 12-page single-spaced letter explaining that it had conducted a thorough review of Trending Topics and determined that the allegations in the Gizmodo story were largely false.

    Facebook decided, too, that it had to extend an olive branch to the entire American right wing, much of which was raging about the company’s supposed perfidy. And so, just over a week after the story ran, Facebook scrambled to invite a group of 17 prominent Republicans out to Menlo Park. The list included television hosts, radio stars, think tankers, and an adviser to the Trump campaign. The point was partly to get feedback. But more than that, the company wanted to make a show of apologizing for its sins, lifting up the back of its shirt, and asking for the lash.

    According to a Facebook employee involved in planning the meeting, part of the goal was to bring in a group of conservatives who were certain to fight with one another. They made sure to have libertarians who wouldn’t want to regulate the platform and partisans who would. Another goal, according to the employee, was to make sure the attendees were “bored to death” by a technical presentation after Zuckerberg and Sandberg had addressed the group.

    The power went out, and the room got uncomfortably hot. But otherwise the meeting went according to plan. The guests did indeed fight, and they failed to unify in a way that was either threatening or coherent. Some wanted the company to set hiring quotas for conservative employees; others thought that idea was nuts. As often happens when outsiders meet with Facebook, people used the time to try to figure out how they could get more followers for their own pages.

    Afterward, Glenn Beck, one of the invitees, wrote an essay about the meeting, praising Zuckerberg. “I asked him if Facebook, now or in the future, would be an open platform for the sharing of all ideas or a curator of content,” Beck wrote. “Without hesitation, with clarity and boldness, Mark said there is only one Facebook and one path forward: ‘We are an open platform.’”

    Inside Facebook itself, the backlash around Trending Topics did inspire some genuine soul-searching. But none of it got very far. A quiet internal project, codenamed Hudson, cropped up around this time to determine, according to someone who worked on it, whether News Feed should be modified to better deal with some of the most complex issues facing the product. Does it favor posts that make people angry? Does it favor simple or even false ideas over complex and true ones? Those are hard questions, and the company didn’t have answers to them yet. Ultimately, in late June, Facebook announced a modest change: The algorithm would be revised to favor posts from friends and family. At the same time, Adam Mosseri, Facebook’s News Feed boss, posted a manifesto titled “Building a Better News Feed for You.” People inside Facebook spoke of it as a document roughly resembling the Magna Carta; the company had never spoken before about how News Feed really worked. To outsiders, though, the document came across as boilerplate. It said roughly what you’d expect: that the company was opposed to clickbait but that it wasn’t in the business of favoring certain kinds of viewpoints.

    The most important consequence of the Trending Topics controversy, according to nearly a dozen former and current employees, was that Facebook became wary of doing anything that might look like stifling conservative news. It had burned its fingers once and didn’t want to do it again. And so a summer of deeply partisan rancor and calumny began with Facebook eager to stay out of the fray.


    Shortly after Mosseri published his guide to News Feed values, Zuckerberg traveled to Sun Valley, Idaho, for an annual conference hosted by billionaire Herb Allen, where moguls in short sleeves and sunglasses cavort and make plans to buy each other’s companies. But Rupert Murdoch broke the mood in a meeting that took place inside his villa. According to numerous accounts of the conversation, Murdoch and Robert Thomson, the CEO of News Corp, explained to Zuckerberg that they had long been unhappy with Facebook and Google. The two tech giants had taken nearly the entire digital ad market and become an existential threat to serious journalism. According to people familiar with the conversation, the two News Corp leaders accused Facebook of making dramatic changes to its core algorithm without adequately consulting its media partners, wreaking havoc according to Zuckerberg’s whims. If Facebook didn’t start offering a better deal to the publishing industry, Thomson and Murdoch conveyed in stark terms, Zuckerberg could expect News Corp executives to become much more public in their denunciations and much more open in their lobbying. They had helped to make things very hard for Google in Europe. And they could do the same for Facebook in the US.

    Facebook thought that News Corp was threatening to push for a government antitrust investigation or maybe an inquiry into whether the company deserved its protection from liability as a neutral platform. Inside Facebook, executives believed Murdoch might use his papers and TV stations to amplify critiques of the company. News Corp says that was not at all the case; the company threatened to deploy executives, but not its journalists.

    Zuckerberg had reason to take the meeting especially seriously, according to a former Facebook executive, because he had firsthand knowledge of Murdoch’s skill in the dark arts. Back in 2007, Facebook had come under criticism from 49 state attorneys general for failing to protect young Facebook users from sexual predators and inappropriate content. Concerned parents had written to Connecticut attorney general Richard Blumenthal, who opened an investigation, and to The New York Times, which published a story. But according to a former Facebook executive in a position to know, the company believed that many of the Facebook accounts and the predatory behavior the letters referenced were fakes, traceable to News Corp lawyers or others working for Murdoch, who owned Facebook’s biggest competitor, MySpace. “We traced the creation of the Facebook accounts to IP addresses at the Apple store a block away from the MySpace offices in Santa Monica,” the executive says. “Facebook then traced interactions with those accounts to News Corp lawyers. When it comes to Facebook, Murdoch has been playing every angle he can for a long time.” (Both News Corp and its spinoff 21st Century Fox declined to comment.)

    Zuckerberg took Murdoch’s threats seriously—he had firsthand knowledge of the older man’s skill in the dark arts.

    When Zuckerberg returned from Sun Valley, he told his employees that things had to change. They still weren’t in the news business, but they had to make sure there would be a news business. And they had to communicate better. One of those who got a new to-do list was Andrew Anker, a product manager who’d arrived at Facebook in 2015 after a career in journalism (including a long stint at WIRED in the ’90s). One of his jobs was to help the company think through how publishers could make money on the platform. Shortly after Sun Valley, Anker met with Zuckerberg and asked to hire 60 new people to work on partnerships with the news industry. Before the meeting ended, the request was approved.

    But having more people out talking to publishers just drove home how hard it would be to resolve the financial problems Murdoch wanted fixed. News outfits were spending millions to produce stories that Facebook was benefiting from, and Facebook, they felt, was giving too little back in return. Instant Articles, in particular, struck them as a Trojan horse. Publishers complained that they could make more money from stories that loaded on their own mobile web pages than on Facebook Instant. (They often did so, it turned out, in ways that short-changed advertisers, by sneaking in ads that readers were unlikely to see. Facebook didn’t let them get away with that.) Another seemingly irreconcilable difference: Outlets like Murdoch’s Wall Street Journal depended on paywalls to make money, but Instant Articles banned paywalls; Zuckerberg disapproved of them. After all, he would often ask, how exactly do walls and toll booths make the world more open and connected?

    The conversations often ended at an impasse, but Facebook was at least becoming more attentive. This newfound appreciation for the concerns of journalists did not, however, extend to the journalists on Facebook’s own Trending Topics team. In late August, everyone on the team was told that their jobs were being eliminated. Simultaneously, authority over the algorithm shifted to a team of engineers based in Seattle. Very quickly the module started to surface lies and fiction. A headline days later read, “Fox News Exposes Traitor Megyn Kelly, Kicks Her Out For Backing Hillary."


    While Facebook grappled internally with what it was becoming—a company that dominated media but didn’t want to be a media company—Donald Trump’s presidential campaign staff faced no such confusion. To them Facebook’s use was obvious. Twitter was a tool for communicating directly with supporters and yelling at the media. Facebook was the way to run the most effective direct-­marketing political operation in history.

    In the summer of 2016, at the top of the general election campaign, Trump’s digital operation might have seemed to be at a major disadvantage. After all, Hillary Clinton’s team was flush with elite talent and got advice from Eric Schmidt, known for running ­Google. Trump’s was run by Brad Parscale, known for setting up the Eric Trump Foundation’s web page. Trump’s social media director was his former caddie. But in 2016, it turned out you didn’t need digital experience running a presidential campaign, you just needed a knack for Facebook.

    Over the course of the summer, Trump’s team turned the platform into one of its primary vehicles for fund-­raising. The campaign uploaded its voter files—the names, addresses, voting history, and any other information it had on potential voters—to Facebook. Then, using a tool called Look­alike Audiences, Facebook identified the broad characteristics of, say, people who had signed up for Trump newsletters or bought Trump hats. That allowed the campaign to send ads to people with similar traits. Trump would post simple messages like “This election is being rigged by the media pushing false and unsubstantiated charges, and outright lies, in order to elect Crooked Hillary!” that got hundreds of thousands of likes, comments, and shares. The money rolled in. Clinton’s wonkier messages, meanwhile, resonated less on the platform. Inside Facebook, almost everyone on the executive team wanted Clinton to win; but they knew that Trump was using the platform better. If he was the candidate for Facebook, she was the candidate for LinkedIn.

    Trump’s candidacy also proved to be a wonderful tool for a new class of scammers pumping out massively viral and entirely fake stories. Through trial and error, they learned that memes praising the former host of The Apprentice got many more readers than ones praising the former secretary of state. A website called Ending the Fed proclaimed that the Pope had endorsed Trump and got almost a million comments, shares, and reactions on Facebook, according to an analysis by BuzzFeed. Other stories asserted that the former first lady had quietly been selling weapons to ISIS, and that an FBI agent suspected of leaking Clinton’s emails was found dead. Some of the posts came from hyperpartisan Americans. Some came from overseas content mills that were in it purely for the ad dollars. By the end of the campaign, the top fake stories on the platform were generating more engagement than the top real ones.

    Even current Facebookers acknowledge now that they missed what should have been obvious signs of people misusing the platform. And looking back, it’s easy to put together a long list of possible explanations for the myopia in Menlo Park about fake news. Management was gun-shy because of the Trending Topics fiasco; taking action against partisan disinformation—or even identifying it as such—might have been seen as another act of political favoritism. Facebook also sold ads against the stories, and sensational garbage was good at pulling people into the platform. Employees’ bonuses can be based largely on whether Facebook hits certain growth and revenue targets, which gives people an extra incentive not to worry too much about things that are otherwise good for engagement. And then there was the ever-present issue of Section 230 of the 1996 Communications Decency Act. If the company started taking responsibility for fake news, it might have to take responsibility for a lot more. Facebook had plenty of reasons to keep its head in the sand.

    Roger McNamee, however, watched carefully as the nonsense spread. First there were the fake stories pushing Bernie Sanders, then he saw ones supporting Brexit, and then helping Trump. By the end of the summer, he had resolved to write an op-ed about the problems on the platform. But he never ran it. “The idea was, look, these are my friends. I really want to help them.” And so on a Sunday evening, nine days before the 2016 election, McNamee emailed a 1,000-word letter to Sandberg and Zuckerberg. “I am really sad about Facebook,” it began. “I got involved with the company more than a decade ago and have taken great pride and joy in the company’s success … until the past few months. Now I am disappointed. I am embarrassed. I am ashamed.”

    Eddie Guy


    It’s not easy to recognize that the machine you’ve built to bring people together is being used to tear them apart, and Mark Zuckerberg’s initial reaction to Trump’s victory, and Facebook’s possible role in it, was one of peevish dismissal. Executives remember panic the first few days, with the leadership team scurrying back and forth between Zuckerberg’s conference room (called the Aquarium) and Sandberg’s (called Only Good News), trying to figure out what had just happened and whether they would be blamed. Then, at a conference two days after the election, Zuckerberg argued that filter bubbles are worse offline than on Facebook and that social media hardly influences how people vote. “The idea that fake news on Facebook—of which, you know, it’s a very small amount of the content—influenced the election in any way, I think, is a pretty crazy idea,” he said.

    Zuckerberg declined to be interviewed for this article, but people who know him well say he likes to form his opinions from data. And in this case he wasn’t without it. Before the interview, his staff had worked up a back-of-the-­envelope calculation showing that fake news was a tiny percentage of the total amount of election-­related content on the platform. But the analysis was just an aggregate look at the percentage of clearly fake stories that appeared across all of Facebook. It didn’t measure their influence or the way fake news affected specific groups. It was a number, but not a particularly meaningful one.

    Zuckerberg’s comments did not go over well, even inside Facebook. They seemed clueless and self-absorbed. “What he said was incredibly damaging,” a former executive told WIRED. “We had to really flip him on that. We realized that if we didn’t, the company was going to start heading down this pariah path that Uber was on.”

    A week after his “pretty crazy” comment, Zuckerberg flew to Peru to give a talk to world leaders about the ways that connecting more people to the internet, and to Facebook, could reduce global poverty. Right after he landed in Lima, he posted something of a mea culpa. He explained that Facebook did take misinformation seriously, and he presented a vague seven-point plan to tackle it. When a professor at the New School named David Carroll saw Zuckerberg’s post, he took a screenshot. Alongside it on Carroll’s feed ran a headline from a fake CNN with an image of a distressed Donald Trump and the text “DISQUALIFIED; He’s GONE!”

    At the conference in Peru, Zuckerberg met with a man who knows a few things about politics: Barack Obama. Media reports portrayed the encounter as one in which the lame-duck president pulled Zuckerberg aside and gave him a “wake-up call” about fake news. But according to someone who was with them in Lima, it was Zuckerberg who called the meeting, and his agenda was merely to convince Obama that, yes, Facebook was serious about dealing with the problem. He truly wanted to thwart misinformation, he said, but it wasn’t an easy issue to solve.

    One employee compared Zuckerberg to Lennie in Of Mice and Men—a man with no understanding of his own strength.

    Meanwhile, at Facebook, the gears churned. For the first time, insiders really began to question whether they had too much power. One employee told WIRED that, watching Zuckerberg, he was reminded of Lennie in Of Mice and Men, the farm-worker with no understanding of his own strength.

    Very soon after the election, a team of employees started working on something called the News Feed Integrity Task Force, inspired by a sense, one of them told WIRED, that hyperpartisan misinformation was “a disease that’s creeping into the entire platform.” The group, which included Mosseri and Anker, began to meet every day, using whiteboards to outline different ways they could respond to the fake-news crisis. Within a few weeks the company announced it would cut off advertising revenue for ad farms and make it easier for users to flag stories they thought false.

    In December the company announced that, for the first time, it would introduce fact-checking onto the platform. Facebook didn’t want to check facts itself; instead it would outsource the problem to professionals. If Facebook received enough signals that a story was false, it would automatically be sent to partners, like Snopes, for review. Then, in early January, Facebook announced that it had hired Campbell Brown, a former anchor at CNN. She immediately became the most prominent journalist hired by the company.

    Soon Brown was put in charge of something called the Facebook Journalism Project. “We spun it up over the holidays, essentially,” says one person involved in discussions about the project. The aim was to demonstrate that Facebook was thinking hard about its role in the future of journalism—essentially, it was a more public and organized version of the efforts the company had begun after Murdoch’s tongue-lashing. But sheer anxiety was also part of the motivation. “After the election, because Trump won, the media put a ton of attention on fake news and just started hammering us. People started panicking and getting afraid that regulation was coming. So the team looked at what Google had been doing for years with News Lab”—a group inside Alphabet that builds tools for journalists—“and we decided to figure out how we could put together our own packaged program that shows how seriously we take the future of news.”

    Facebook was reluctant, however, to issue any mea culpas or action plans with regard to the problem of filter bubbles or Facebook’s noted propensity to serve as a tool for amplifying outrage. Members of the leadership team regarded these as issues that couldn’t be solved, and maybe even shouldn’t be solved. Was Facebook really more at fault for amplifying outrage during the election than, say, Fox News or MSNBC? Sure, you could put stories into people’s feeds that contradicted their political viewpoints, but people would turn away from them, just as surely as they’d flip the dial back if their TV quietly switched them from Sean Hannity to Joy Reid. The problem, as Anker puts it, “is not Facebook. It’s humans.”


    Zuckerberg’s “pretty crazy” statement about fake news caught the ear of a lot of people, but one of the most influential was a security researcher named Renée DiResta. For years, she’d been studying how misinformation spreads on the platform. If you joined an antivaccine group on Facebook, she observed, the platform might suggest that you join flat-earth groups or maybe ones devoted to Pizzagate—putting you on a conveyor belt of conspiracy thinking. Zuckerberg’s statement struck her as wildly out of touch. “How can this platform say this thing?” she remembers thinking.

    Roger McNamee, meanwhile, was getting steamed at Facebook’s response to his letter. Zuckerberg and Sandberg had written him back promptly, but they hadn’t said anything substantial. Instead he ended up having a months-long, ultimately futile set of email exchanges with Dan Rose, Facebook’s VP for partnerships. McNamee says Rose’s message was polite but also very firm: The company was doing a lot of good work that McNamee couldn’t see, and in any event Facebook was a platform, not a media company.

    “And I’m sitting there going, ‘Guys, seriously, I don’t think that’s how it works,’” McNamee says. “You can assert till you’re blue in the face that you’re a platform, but if your users take a different point of view, it doesn’t matter what you assert.”

    As the saying goes, heaven has no rage like love to hatred turned, and McNamee’s concern soon became a cause—and the beginning of an alliance. In April 2017 he connected with a former Google design ethicist named Tristan Harris when they appeared together on Bloomberg TV. Harris had by then gained a national reputation as the conscience of Silicon Valley. He had been profiled on 60 Minutes and in The Atlantic, and he spoke eloquently about the subtle tricks that social media companies use to foster an addiction to their services. “They can amplify the worst aspects of human nature,” Harris told WIRED this past December. After the TV appearance, McNamee says he called Harris up and asked, “Dude, do you need a wingman?”

    The next month, DiResta published an ­article comparing purveyors of disinformation on social media to manipulative high-frequency traders in financial markets. “Social networks enable malicious actors to operate at platform scale, because they were designed for fast information flows and virality,” she wrote. Bots and sock puppets could cheaply “create the illusion of a mass groundswell of grassroots activity,” in much the same way that early, now-illegal trading algorithms could spoof demand for a stock. Harris read the article, was impressed, and emailed her.

    The three were soon out talking to anyone who would listen about Facebook’s poisonous effects on American democracy. And before long they found receptive audiences in the media and Congress—groups with their own mounting grievances against the social media giant.


    Even at the best of times, meetings between Facebook and media executives can feel like unhappy family gatherings. The two sides are inextricably bound together, but they don’t like each other all that much. News executives resent that Facebook and Google have captured roughly three-quarters of the digital ad business, leaving the media industry and other platforms, like Twitter, to fight over scraps. Plus they feel like the preferences of Facebook’s algorithm have pushed the industry to publish ever-dumber stories. For years, The New York Times resented that Facebook helped elevate BuzzFeed; now BuzzFeed is angry about being displaced by clickbait.

    And then there’s the simple, deep fear and mistrust that Facebook inspires. Every publisher knows that, at best, they are sharecroppers on Facebook’s massive industrial farm. The social network is roughly 200 times more valuable than the Times. And journalists know that the man who owns the farm has the leverage. If Facebook wanted to, it could quietly turn any number of dials that would harm a publisher—by manipulating its traffic, its ad network, or its readers.

    Emissaries from Facebook, for their part, find it tiresome to be lectured by people who can’t tell an algorithm from an API. They also know that Facebook didn’t win the digital ad market through luck: It built a better ad product. And in their darkest moments, they wonder: What’s the point? News makes up only about 5 percent of the total content that people see on Facebook globally. The company could let it all go and its shareholders would scarcely notice. And there’s another, deeper problem: Mark Zuckerberg, according to people who know him, prefers to think about the future. He’s less interested in the news industry’s problems right now; he’s interested in the problems five or 20 years from now. The editors of major media companies, on the other hand, are worried about their next quarter—maybe even their next phone call. When they bring lunch back to their desks, they know not to buy green bananas.

    This mutual wariness—sharpened almost to enmity in the wake of the election—did not make life easy for Campbell Brown when she started her new job running the nascent Facebook Journalism Project. The first item on her to-do list was to head out on yet another Facebook listening tour with editors and publishers. One editor describes a fairly typical meeting: Brown and Chris Cox, Facebook’s chief product officer, invited a group of media leaders to gather in late January 2017 at Brown’s apartment in Manhattan. Cox, a quiet, suave man, sometimes referred to as “the Ryan Gosling of Facebook Product,” took the brunt of the ensuing abuse. “Basically, a bunch of us just laid into him about how Facebook was destroying journalism, and he graciously absorbed it,” the editor says. “He didn’t much try to defend them. I think the point was really to show up and seem to be listening.” Other meetings were even more tense, with the occasional comment from journalists noting their interest in digital antitrust issues.

    As bruising as all this was, Brown’s team became more confident that their efforts were valued within the company when Zuckerberg published a 5,700-word corporate manifesto in February. He had spent the previous three months, according to people who know him, contemplating whether he had created something that did more harm than good. “Are we building the world we all want?” he asked at the beginning of his post, implying that the answer was an obvious no. Amid sweeping remarks about “building a global community,” he emphasized the need to keep people informed and to knock out false news and clickbait. Brown and others at Facebook saw the manifesto as a sign that Zuckerberg understood the company’s profound civic responsibilities. Others saw the document as blandly grandiose, showcasing Zuckerberg’s tendency to suggest that the answer to nearly any problem is for people to use Facebook more.

    Shortly after issuing the manifesto, Zuckerberg set off on a carefully scripted listening tour of the country. He began popping into candy shops and dining rooms in red states, camera crew and personal social media team in tow. He wrote an earnest post about what he was learning, and he deflected questions about whether his real goal was to become president. It seemed like a well-­meaning effort to win friends for Facebook. But it soon became clear that Facebook’s biggest problems emanated from places farther away than Ohio.


    One of the many things Zuckerberg seemed not to grasp when he wrote his manifesto was that his platform had empowered an enemy far more sophisticated than Macedonian teenagers and assorted low-rent purveyors of bull. As 2017 wore on, however, the company began to realize it had been attacked by a foreign influence operation. “I would draw a real distinction between fake news and the Russia stuff,” says an executive who worked on the company’s response to both. “With the latter there was a moment where everyone said ‘Oh, holy shit, this is like a national security situation.’”

    That holy shit moment, though, didn’t come until more than six months after the election. Early in the campaign season, Facebook was aware of familiar attacks emanating from known Russian hackers, such as the group APT28, which is believed to be affiliated with Moscow. They were hacking into accounts outside of Facebook, stealing documents, then creating fake Facebook accounts under the banner of DCLeaks, to get people to discuss what they’d stolen. The company saw no signs of a serious, concerted foreign propaganda campaign, but it also didn’t think to look for one.

    During the spring of 2017, the company’s security team began preparing a report about how Russian and other foreign intelligence operations had used the platform. One of its authors was Alex Stamos, head of Facebook’s security team. Stamos was something of an icon in the tech world for having reportedly resigned from his previous job at Yahoo after a conflict over whether to grant a US intelligence agency access to Yahoo servers. According to two people with direct knowledge of the document, he was eager to publish a detailed, specific analysis of what the company had found. But members of the policy and communications team pushed back and cut his report way down. Sources close to the security team suggest the company didn’t want to get caught up in the political whirlwind of the moment. (Sources on the politics and communications teams insist they edited the report down, just because the darn thing was hard to read.)

    On April 27, 2017, the day after the Senate announced it was calling then FBI director James Comey to testify about the Russia investigation, Stamos’ report came out. It was titled “Information Operations and Facebook,” and it gave a careful step-by-step explanation of how a foreign adversary could use Facebook to manipulate people. But there were few specific examples or details, and there was no direct mention of Russia. It felt bland and cautious. As Renée DiResta says, “I remember seeing the report come out and thinking, ‘Oh, goodness, is this the best they could do in six months?’”

    One month later, a story in Time suggested to Stamos’ team that they might have missed something in their analysis. The article quoted an unnamed senior intelligence official saying that Russian operatives had bought ads on Facebook to target Americans with propaganda. Around the same time, the security team also picked up hints from congressional investigators that made them think an intelligence agency was indeed looking into Russian Facebook ads. Caught off guard, the team members started to dig into the company’s archival ads data themselves.

    Eventually, by sorting transactions according to a series of data points—Were ads purchased in rubles? Were they purchased within browsers whose language was set to Russian?—they were able to find a cluster of accounts, funded by a shadowy Russian group called the Internet Research Agency, that had been designed to manipulate political opinion in America. There was, for example, a page called Heart of Texas, which pushed for the secession of the Lone Star State. And there was Blacktivist, which pushed stories about police brutality against black men and women and had more followers than the verified Black Lives Matter page.

    Numerous security researchers express consternation that it took Facebook so long to realize how the Russian troll farm was exploiting the platform. After all, the group was well known to Facebook. Executives at the company say they’re embarrassed by how long it took them to find the fake accounts, but they point out that they were never given help by US intelligence agencies. A staffer on the Senate Intelligence Committee likewise voiced exasperation with the company. “It seemed obvious that it was a tactic the Russians would exploit,” the staffer says.

    When Facebook finally did find the Russian propaganda on its platform, the discovery set off a crisis, a scramble, and a great deal of confusion. First, due to a miscalculation, word initially spread through the company that the Russian group had spent millions of dollars on ads, when the actual total was in the low six figures. Once that error was resolved, a disagreement broke out over how much to reveal, and to whom. The company could release the data about the ads to the public, release everything to Congress, or release nothing. Much of the argument hinged on questions of user privacy. Members of the security team worried that the legal process involved in handing over private user data, even if it belonged to a Russian troll farm, would open the door for governments to seize data from other Facebook users later on. “There was a real debate internally,” says one executive. “Should we just say ‘Fuck it’ and not worry?” But eventually the company decided it would be crazy to throw legal caution to the wind “just because Rachel Maddow wanted us to.”

    Ultimately, a blog post appeared under Stamos’ name in early September announcing that, as far as the company could tell, the Russians had paid Facebook $100,000 for roughly 3,000 ads aimed at influencing American politics around the time of the 2016 election. Every sentence in the post seemed to downplay the substance of these new revelations: The number of ads was small, the expense was small. And Facebook wasn’t going to release them. The public wouldn’t know what they looked like or what they were really aimed at doing.

    This didn’t sit at all well with DiResta. She had long felt that Facebook was insufficiently forthcoming, and now it seemed to be flat-out stonewalling. “That was when it went from incompetence to malice,” she says. A couple of weeks later, while waiting at a Walgreens to pick up a prescription for one of her kids, she got a call from a researcher at the Tow Center for Digital Journalism named Jonathan Albright. He had been mapping ecosystems of misinformation since the election, and he had some excellent news. “I found this thing,” he said. Albright had started digging into CrowdTangle, one of the analytics platforms that Facebook uses. And he had discovered that the data from six of the accounts Facebook had shut down were still there, frozen in a state of suspended animation. There were the posts pushing for Texas secession and playing on racial antipathy. And then there were political posts, like one that referred to Clinton as “that murderous anti-American traitor Killary.” Right before the election, the Blacktivist account urged its supporters to stay away from Clinton and instead vote for Jill Stein. Albright downloaded the most recent 500 posts from each of the six groups. He reported that, in total, their posts had been shared more than 340 million times.

    Eddie Guy


    To McNamee, the way the Russians used the platform was neither a surprise nor an anomaly. “They find 100 or 1,000 people who are angry and afraid and then use Facebook’s tools to advertise to get people into groups,” he says. “That’s exactly how Facebook was designed to be used.”

    McNamee and Harris had first traveled to DC for a day in July to meet with members of Congress. Then, in September, they were joined by DiResta and began spending all their free time counseling senators, representatives, and members of their staffs. The House and Senate Intelligence Committees were about to hold hearings on Russia’s use of social media to interfere in the US election, and McNamee, Harris, and ­DiResta were helping them prepare. One of the early questions they weighed in on was the matter of who should be summoned to testify. Harris recommended that the CEOs of the big tech companies be called in, to create a dramatic scene in which they all stood in a neat row swearing an oath with their right hands in the air, roughly the way tobacco executives had been forced to do a generation earlier. Ultimately, though, it was determined that the general counsels of the three companies—Facebook, Twitter, and Google—should head into the lion’s den.

    And so on November 1, Colin Stretch arrived from Facebook to be pummeled. During the hearings themselves, DiResta was sitting on her bed in San Francisco, watching them with her headphones on, trying not to wake up her small children. She listened to the back-and-forth in Washington while chatting on Slack with other security researchers. She watched as Marco Rubio smartly asked whether Facebook even had a policy forbidding foreign governments from running an influence campaign through the platform. The answer was no. Rhode Island senator Jack Reed then asked whether Facebook felt an obligation to individually notify all the users who had seen Russian ads that they had been deceived. The answer again was no. But maybe the most threatening comment came from Dianne Feinstein, the senior senator from Facebook’s home state. “You’ve created these platforms, and now they’re being misused, and you have to be the ones to do something about it,” she declared. “Or we will.”

    After the hearings, yet another dam seemed to break, and former Facebook executives started to go public with their criticisms of the company too. On November 8, billionaire entrepreneur Sean Parker, Facebook’s first president, said he now regretted pushing Facebook so hard on the world. “I don’t know if I really understood the consequences of what I was saying,” h

    Read more: https://www.wired.com/story/inside-facebook-mark-zuckerberg-2-years-of-hell/

    U.S. Regulators Subpoena Crypto Exchange Bitfinex, Tether

    U.S. regulators are scrutinizing one of the world’s largest cryptocurrency exchanges as questions mount over a digital token linked to its backers.

    The U.S. Commodity Futures Trading Commission sent subpoenas on Dec. 6 to virtual-currency venue Bitfinex and Tether, a company that issues a widely traded coin and claims it’s pegged to the dollar, according to a person familiar with the matter, who asked not to be identified discussing private information. The firms share the same chief executive officer.

    Tether’s coins have become a popular substitute for dollars on cryptocurrency exchanges worldwide, with about $2.3 billion of the tokens outstanding as of Tuesday. While Tether has said all of its coins are backed by U.S. dollars held in reserve, the company has yet to provide conclusive evidence of its holdings to the public or have its accounts audited. Skeptics have questioned whether the money is really there.

    “We routinely receive legal process from law enforcement agents and regulators conducting investigations,” Bitfinex and Tether said Tuesday in an emailed statement. “It is our policy not to comment on any such requests.”

    Erica Richardson, a CFTC spokeswoman, declined to comment.

    Bitcoin, the biggest cryptocurrency by market value, tumbled 10 percent on Tuesday. It fell another 3.2 percent to $9,766.41 as of 9:19 a.m. in Hong Kong, according to composite pricing on Bloomberg. The virtual currency hasn’t closed below $10,000 since November.

    See also: Mystery shrouds Tether and its links to Bitcoin exchange

    While Tether and Bitfinex don’t disclose on their websites or in public documents where they’re located or who’s in charge, Ronn Torossian, a spokesman for the firms, said in a Dec. 3 email that Jan Ludovicus van der Velde is the CEO of both. Phil Potter is a Tether director, according to documents — dubbed the Paradise Papers — recently leaked by the International Consortium of Investigative Journalists. He’s also the chief strategy officer at Bitfinex.

    Last year, Wells Fargo & Co. ended its role as a correspondent bank through which customers in the U.S. could send money to bank accounts held by Bitfinex and Tether in Taiwan. The firms sued the lender, but later withdrew the complaint. Torossian previously declined to identify the banks used by Bitfinex unless a non-disclosure agreement was signed, which Bloomberg News refused.

    No Audit

    While little public information exists about how tethers are created, market pricing suggests traders believe that each coin is worth $1. Trading the token for Bitcoin at Bitfinex has helped drive up Bitcoin prices, Barry Leybovich, a product manager at IPC Systems Inc. who creates risk and compliance products for financial institutions interested in blockchain applications, said last month.

    A document on Tether’s website, compiled by accounting firm Friedman LLP, shows it had $443 million and 1,590 euros ($1,970) in bank accounts as of Sept. 15. Tether tokens were valued at $420 million that day, according to Coinmarketcap.com. Tether hasn’t identified the banks where that money was held, and their names were blacked out in the document.

    Friedman said in its report that it didn’t investigate the reliability of Tether’s records. The accounting firm and Tether have recently cut ties, Tether said in a separate statement Monday.

    “Given the excruciatingly detailed procedures Friedman was undertaking for the relatively simple balance sheet of Tether, it became clear that an audit would be unattainable in a reasonable timeframe,” Tether said.

    For more on cryptocurrencies, check out the podcast: 

    Friedman didn’t reply to messages seeking comment.

      Read more: http://www.bloomberg.com/news/articles/2018-01-30/crypto-exchange-bitfinex-tether-said-to-get-subpoenaed-by-cftc

      Amazon, Berkshire, JPMorgan Link Up to Form New Health-Care Company

      It’s no secret Jeff Bezos has been looking to crack health care. But no one expected him to pull in Warren Buffett and Jamie Dimon, too.

      News Tuesday that Bezos’s Amazon.com Inc., Buffett’s Berkshire Hathaway Inc. and JPMorgan Chase & Co., led by Dimon, plan to join forces to change how health care is provided to their combined 1 million U.S. employees sent shock waves through the health-care industry.

      The plan, while in early stages and focused solely on the three giants’ staff for now, seems almost certain to set its sights on disrupting the broader industry. It’s the first big move by Amazon in the sector after months of speculation that the internet behemoth might make an entry. The Amazon-Berkshire-JPMorgan collaboration will likely pressure profits for middlemen in the health-care supply chain.

      Details were scant in a short joint statement on Tuesday. The three companies said they plan to set up a new independent company “that is free from profit-making incentives and constraints.”

      It was enough to sink health-care stocks. Express Scripts Holding Co. and CVS Health Corp., which manage pharmacy benefits, slumped 6.9 percent and 4.9 percent, respectively. Health insurers such as Cigna Corp. and Anthem Inc. and biotechnology companies also dropped.

      The group announced the news in the very early stages because it plans to hire a CEO and start partnering with other organizations, according to a person familiar with the matter. The effort would be focused internally first, and the companies would bring their data and bargaining power to bear on lowering health-care costs, the person said. Potential ways to bring down costs include providing more transparency over the prices for doctor visits and lab tests, as well as by enabling direct purchasing of some medical items, the person said.

      “I’m in favor of anything that helps move the markets a bit, incentivizes competition and puts pressure on the big insurance carriers,” said Ashraf Shehata, a partner in KPMG LLP’s health care and life sciences advisory practice in the U.S. “An employer coalition can do a lot of things. You can encourage reimbursement models and provide incentives for the use of technology.”

      “Hard as it might be, reducing health care’s burden on the economy while improving outcomes for employees and their families would be worth the effort,” Bezos said in the statement. “Success is going to require talented experts, a beginner’s mind, and a long-term orientation.”

      The initial focus of the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent health care at a reasonable costs. In the statement, JPMorgan CEO Dimon said the initiative could ultimately expand beyond the three companies.

      “Our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans,” he said.

      HTA Alliance

      Amazon, Berkshire and JPMorgan are among the largest private employers in the U.S. And they’re among the most valuable, with a combined market capitalization of $1.6 trillion, according to data compiled by Bloomberg.

      This isn’t the first time big companies have teamed up in an effort to tackle health-care costs. International Business Machines Corp., Berkshire’s BNSF Railway and American Express Co. were among the founding members of the Health Transformation Alliance, which now includes about 40 big companies that want to transform health care. The group ultimately partnered with existing industry players including CVS and UnitedHealth Group Inc.’s OptumRx.

      Top Team

      The latest effort is being spearheaded by Todd Combs, who helps oversee investments at Berkshire; Marvelle Sullivan Berchtold, a managing director of JPMorgan; and Beth Galetti, a senior vice president for human resources at Amazon.

      Buffett handpicked Combs in 2010 as one of his two key stockpickers. Combs, 47, has been taking on a larger role at Berkshire in recent years, and Buffett has said that Combs and Ted Weschler, who also helps oversee investments, will eventually manage the company’s whole portfolio. Combs also joined JPMorgan’s board in 2016.

      Sullivan Berchtold joined JPMorgan in August after eight years at the Swiss pharmaceutical company Novartis AG, where she was most recently the global head of mergers and acquisitions, according to her LinkedIn profile.

      One of the highest ranking women at Amazon, Galetti has worked in human resources at the e-commerce giant since mid-2013, becoming senior vice president almost two years ago, according to her LinkedIn profile. As of late 2017 she was the only woman on Amazon’s elite S-team, a group of just over a dozen senior executives who meet regularly with Bezos, according to published reports. Previously Galetti worked in planning, engineering and operations at FedEx Express, the cargo airline of FedEx Corp. She has a degree in electrical engineering from Lehigh University and an MBA from Colorado Technical University.

      The management team, location of the headquarters and other operational details will be announced later, the companies said.

      Health-care spending was estimated to account for about 18 percent of the U.S. economy last year, far more than in other developed nations. Buffett has long bemoaned the cost of U.S. health care. Last year, he came out in favor of drastic changes in the U.S. health system, telling PBS NewsHour that government-run health care is probably the best approach and would bring down costs.

      “The ballooning costs of health care act as a hungry tapeworm on the American economy,” Buffett said in Tuesday’s statement. “Our group does not come to this problem with answers. But we also do not accept it as inevitable.”

        Read more: http://www.bloomberg.com/news/articles/2018-01-30/amazon-berkshire-jpmorgan-to-set-up-a-health-company-for-staff

        Trump’s Tariffs on Solar Mark Biggest Blow to Renewables Yet

        President Donald Trump dealt his biggest blow to the renewable energy industry yet.

        On Monday, Trump approved duties of as much as 30 percent on solar equipment made outside the U.S., a move that threatens to handicap a $28 billion industry that relies on parts made abroad for 80 percent of its supply. 

        The tariffs are the latest action by Trump to undermine the economics of renewables. The administration already decided to pull the U.S. out of the Paris Agreement on climate change, sought to roll back Obama-era regulations on power plant-emissions and signed sweeping tax reforms that constrained financing for solar and wind. The import taxes are the most targeted strike on the industry yet and may have larger consequences for the energy world.

        “We are inclined to view it as posing greater trade risk for all types of energy, particularly if other nations establish new trade barriers against U.S. products,” Washington-based research firm ClearView Energy Partners LLC said Monday.

        Solar Surges

        U.S. panel maker First Solar Inc. jumped as much as 9 percent to $75.20 in after-hours trading in New York. The Tempe, Arizona-based manufacturer stands to gain as costs for competing, foreign panels rise.

        Just the threat of tariffs shook solar developers in recent months, with some hoarding panels and others stalling projects in anticipation of higher costs. The Solar Energy Industries Association projected 23,000 job losses this year in a sector that employed 260,000.

        Trump approved four years of tariffs that start at 30 percent in the first year and gradually drop to 15 percent. The first 2.5 gigawatts of imported solar cells are exempt for each year.

        The duties are lower than the 35 percent rate the U.S. International Trade Commission recommended in October after finding that imported panels were harming American manufacturers. The idea behind the tariffs is to raise the costs of cheap imports, particularly from Asia, and level the playing field for those who manufacture the parts domestically.

        “This is not a goodbye for renewable energy in the U.S.,” Fatih Birol, executive director of the International Energy Agency, said at the World Economic Forum in Davos, Switzerland. “I don’t believe this decision will reverse the solar expansion in the U.S. The global solar industry will adjust. The penetration of solar in the U.S. will continue.”

        First Solar is the largest of a handful of panel makers left in the U.S. after most of the industry migrated to China in the past decade. That means the major impact of the duties will be on panel installers, which get most of their supplies from Chinese companies.

        Read More: Why Trump Is Taxing Solar Panels Imported by U.S.: QuickTake Q&A

        Despite higher anticipated costs, American solar installers including Vivint Solar Inc. and Sunrun Inc. jumped in after-hours trading. “A 30 percent tariff in Year One is bad,” said Gordon Johnson, a New York-based analyst at the Vertical Group, but “it’s less than what the consensus was.”

        Jigar Shah, co-founder of investor Generate Capital Inc. and an outspoken advocate for the solar industry, went as far as to describe the decision as “good news.” The tariffs are “exactly what the solar industry asked for behind closed doors” to prevent a negative impact on companies, he said.

        Not Deterred

        The duties won’t be entirely devastating for the U.S. solar industry, said Hugh Bromley, a New York-based analyst at Bloomberg New Energy Finance. He estimated they’ll increase costs for large solar farms by less than 10 percent and for residential systems by about 3 percent.

        The decision will “destruct some demand for new projects in the next two years,” Bromley said. “But they will likely prove insufficient in magnitude and duration to attract many new factories.”

        For Trump, the tariffs represent a step toward making good on a campaign promise to get tough on the country that produces the most panels — China. Trump’s trade issues took a backseat in 2017 while the White House focused on tax reform, but it’s now coming back into the fore: The solar dispute is among several potential trade decisions that also involve washing machines, consumer electronics and steel.

        Solar Threatened

        Tariffs may curb U.S. solar investments that have already fallen in recent years

        Source: Bloomberg New Energy Finance

        The decision comes almost nine months after Suniva Inc., a bankrupt U.S. module manufacturer with a Chinese majority owner, sought import duties on solar cells and panels. It asserted that it had suffered “serious injury” from a flood of cheap panels produced in Asia. A month later, the U.S. unit of German manufacturer SolarWorld AG signed on as a co-petitioner, adding heft to Suniva’s cause.

        Suniva had sought import duties of 32 cents a watt for solar panels produced outside the U.S. and a floor price of 74 cents a watt. Trump’s tariffs translate to a charge of about 10 cents a watt, according to Bromley.

        Read More: U.S. Solar Has a $1.5 Billion, Long-Shot Plan to End a Trade War

        Shunfeng International Clean Energy Ltd., Suniva’s parent, was up 3.9 percent in Hong Kong after jumping as much as 5.2 percent earlier.

        While Trump has broad authority on the size, scope and duration of duties, the dispute may shift to a different venue. China and neighbors including South Korea may opt to challenge the decision at the World Trade Organization — which has rebuffed prior U.S.-imposed tariffs.

        Here’s what people are saying about the tariffs:

        • Suniva thanked Trump for “holding China and its proxies accountable” and said it looked forward to global settlement negotiations. Trump said in his statement that the U.S. Trade Representative will discuss resolving a separate trade dispute that resulted in duties imposed on Chinese solar products and U.S. polysilicon.
        • SolarWorld said it “appreciates the hard work of” Trump and is “hopeful” the tariffs will be enough to rebuild solar manufacturing in the U.S.
        • Sunrun said that while the decision lifts “a cloud of uncertainty,” it runs counter to “consumers, bipartisan elected officials, many military personnel, and the 99 percent of American solar workers whom this tariff will harm in the coming years.” It called for the administration to clarify which countries won’t be subject to the tariffs. (The U.S. Trade Representative said Mexico and Canada will be subject to the duties, despite previous reports that they may be spared.)
        • Rooftop solar installer Sunnova Energy Corp. said the tariffs will not deter the industry. Vivint said it was “disappointed” but would continue to “provide consumers with a better way to create energy.”
        • China’s JinkoSolar Holding Co. said the tariffs were “better than expected” and that it wouldn’t eliminate the possibility of building a plant in the U.S. Taiwan’s Neo Solar Power Corp. similarly said it would study the feasibility of establishing assembly lines in the U.S.
        • South Korea’s Hanwha Q Cells Co. plans to diversify sales to avoid the U.S. tariffs and look for other markets
        • Regardless of the tariffs, solar installer Tesla Inc. said it’s “committed to expanding its domestic manufacturing,” citing a “gigafactory” it opened in Buffalo, New York.
        • Bill Waren, senior trade analyst at Friends of the Earth, called the decision “recklessly irresponsible and a thinly veiled attack on clean energy.”
        • ClearView Energy Partners LLC estimated a roughly 6 percent increase in the costs of commercial solar projects and a 4 percent rise in residential rooftop solar expenses. Large, utility-scale projects may bear the brunt, with a 10 percent increase.
        • The Solar Energy Industries Association warned the tariffs will delay or kill billions of dollars of solar investments.

          Read more: http://www.bloomberg.com/news/articles/2018-01-22/trump-taxes-solar-imports-in-biggest-blow-to-clean-energy-yet

          Facebook to Show Users Which Russian Propaganda They Followed

          Facebook Inc. will show people which Russian propaganda pages or accounts they’ve followed and liked on the social network, responding to a request from Congress to address manipulation and meddling during the 2016 presidential election.

          The tool will appear by the end of the year in Facebook’s online support center, the company said in a blog post Wednesday. It will answer the user question, “How can I see if I’ve liked or followed a Facebook page or Instagram account created by the Internet Research Agency?” That’s the Russian firm that created thousands of incendiary posts from fake accounts posing as U.S. citizens. People will see a list of the accounts they followed, if any, from January 2015 through August 2017.

          It’s Facebook’s most direct effort to explain to users how they may have been affected by the IRA’s postings, which reached an estimated 150 million people and stirred up controversy over gun rights, immigration, race relations and religion in the U.S., sometimes prompting real-world protests on both sides of a debate. 

          “It is important that people understand how foreign actors tried to sow division and mistrust using Facebook before and after the 2016 US election,” the company said in the post.

          Facebook, Alphabet Inc.’s Google and Twitter Inc. appeared in early November for hours of congressional testimony to explain how Russia used the platforms to manipulate U.S. citizens. The companies vowed to do more to prevent anything similar from occurring in the future, and said they would look into the possibility of informing users about their exposure.

          “I hope that Google and Twitter will follow Facebook’s lead,” said U.S. Senator Richard Blumenthal, a Democrat from Connecticut and a member of the Senate Judiciary Committee. Those companies have not responded to a similar request, according to Blumenthal’s office.

          Representative Adam Schiff, a California Democrat and a member of the House Intelligence Committee, called Facebook’s move “a very positive step.”

          “We look forward to additional steps by the companies to improve transparency with respect to Russian abuse of their platforms,” Schiff said in a statement.

          Facebook will only be showing people the names of the pages and accounts, not the content. A user will only see what they liked or followed, so if they simply saw IRA content in their news feeds, they won’t be notified. 

          It’s “much more challenging” to reliably tell people if they were exposed on an individual basis, Facebook General Counsel Colin Stretch told Congress earlier this month. When people like or comment on a post, that post is eligible to show up in any of their friends’ news feeds — helping the content go viral. Facebook argued it couldn’t say for certain who paid attention to what content. That position fell flat when senators noted that Facebook’s business model is based on the targeting and tracking of ads.

            Read more: http://www.bloomberg.com/news/articles/2017-11-22/facebook-to-show-people-the-russian-propaganda-they-followed

            Here’s How the End of Net Neutrality Will Change the Internet

            Internet service providers like Comcast and Verizon may soon be free to block content, slow video-streaming services from rivals, and offer “fast lanes” to preferred partners. For a glimpse of how the internet experience may change, look at what broadband providers are doing under the existing “net neutrality” rules.

            When AT&T customers access its DirecTV Now video-streaming service, the data doesn’t count against their plan’s data limits. Verizon, likewise, exempts its Go90 service from its customers’ data plans. T-Mobile allows multiple video and music streaming services to bypass its data limits, essentially allowing it to pick winners and losers in those categories.

            Consumers will likely see more arrangements like these, granting or blocking access to specific content, if the Federal Communications Commission next month repeals Obama-era net neutrality rules that ban broadband providers from discriminating against lawful content providers. The commission outlined its proposed changes on Tuesday, and published them Wednesday. The proposal would also ban states from passing their own versions of the old rules. Because Republicans have a majority in the agency, the proposal will likely pass and take effect early next year.

            Because many internet services for mobile devices include limits on data use, the changes will be visible there first. In one dramatic scenario, internet services would begin to resemble cable-TV packages, where subscriptions could be limited to a few dozen sites and services. Or, for big spenders, a few hundred. Fortunately, that’s not a likely scenario. Instead, expect a gradual shift towards subscriptions that provide unlimited access to certain preferred providers while charging extra for everything else.

            Net neutrality advocates have long worried that these sorts of preferential offerings harm competition, and by extension, consumers, by making it harder for smaller providers to compete. A company like Netflix or Amazon can likely shell out to sponsor data, but smaller companies don't necessarily have the budget.

            "Net neutrality is incredibly important for small startups like Discord because all internet traffic needs to be treated as equal for us all to have access to the same resources as the big companies," says Jason Citron, co-founder and CEO of the videogame-centric chat and video-conferencing app Discord. Citron's company is well funded and boasts 45 million users. But it competes with larger players like Microsoft's Skype, Google's Hangouts, and Facebook's WhatsApp. Even if Discord can offer a better experience for gamers, bigger companies might be able to gain an advantage by partnering with broadband providers to prioritize or subsidize their apps.

            For even smaller video providers, the end of net neutrality could be dire. "We believe this would affect more than just our voice and video equipment, but our entire ability to host folks interacting across our services," says Nolan T. Jones, managing partner and co-creator of Roll20, a video-conferencing and community platform for tabletop role-playing gamers.

            It can be hard for smaller companies to even get a meeting with large broadband providers. In 2014, when T-Mobile launched a program that exempted music streaming services from its users’ data caps, the founder of streaming service SomaFM complained that his company had been left out. T-Mobile added SomaFM to the program a year later, but it’s not clear how many customers SomaFM may have lost in the interim.

            The FCC ruled earlier this year that these data exemptions, known as "zero rating," are permissible under the current net-neutrality rules. Once those rules go away, the companies will be free to experiment with more drastic measures, like slowing connections to data-hungry apps.

            Even Verizon's "unlimited" plans impose limits. The company's cheapest unlimited mobile plan limits video streaming quality to 480p resolution, which is DVD quality, on phones and 720p resolution, the lower tier of HD quality, on tablets. Customers can upgrade to a more expensive plan that enables 720p resolution on phones and 1080p on tablets, but the higher quality 4K video standard is effectively forbidden.

            Meanwhile, Comcast customers in 28 states face 1 terabyte data caps. Going over that limit costs subscribers as much as an additional $50 a month. As 4K televisions become more common, more households may hit the limit. That could prompt some to stick with a traditional pay-TV package from Comcast.

            It's not hard to see how companies could push these ideas further. Comcast could take a page from Verizon and stop customers from accessing any 4K content unless they pay for an unlimited account. And it could charge companies to sponsor data for their customers.

            For now, Comcast says that’s off the table. “Comcast does not and will not block, throttle, or discriminate against lawful content,” Comcast Cable president and CEO Dave Watson wrote in a blog post Tuesday. AT&T and Verizon did not answer questions about future plans, but spokespeople pointed to blog posts saying the companies support the open internet.

            But even without a dramatic departure from current practices, the future internet, then, could look a more extreme version of today's mobile plans, with different pricing tiers for different levels of video quality for different apps. That means more customer choice, but perhaps not in the way anyone actually wants.

            Republican FCC Chair Ajit Pai argues that Federal Trade Commission will be able to protect consumers and small business from abuses by internet providers once the agency's current rules are off the books. But that’s not clear.

            Democratic FTC commissioner Terrell McSweeny tells WIRED that the FTC is only an enforcement agency. It doesn't have the authority to issue industry-wide rules, such as a ban on blocking lawful content. In many cases, she says, the agency might not be able to use antitrust law against broadband providers that give preferential treatment to their own content or to that of partners.

            "The FTC stands ready to protect broadband subscribers from anticompetitive, unfair, or deceptive acts and practices,” acting FTC Chair Maureen K. Ohlhausen said in a statement Tuesday.

            The good news is the internet won't change overnight, if it all. Blake Reid, a clinical professor at Colorado Law, says the big broadband providers will wait to see how the inevitable legal challenges to the new FCC order shakeout. They'll probably keep an eye on 2018 and even 2020 elections as well. The courts could shoot down the FCC’s order, or, given enough public pressure, Congress even could pass new net neutrality laws.

            UPDATED, 1:10 PM: This article was updated after the FCC published its proposal to eliminate net-neutrality rules.

            Read more: https://www.wired.com/story/heres-how-the-end-of-net-neutrality-will-change-the-internet/

            Artificial intelligence could fix one of humanity’s biggest flaws

            Image: Getty Images/Science Photo Library RF

            Humans develop biases over time. We aren’t born with them. However, examples of gender, economic, occupational and racial bias exist in communities, industries and social contexts around the world. And while there are people leading initiatives to fundamentally change these phenomena in the physical world, it persists and manifests in new ways in the digital world. 

            In the tech world, bias permeates everything from startup culture to investment pitches during funding rounds to the technology itself. Innovations with world-changing potential don’t get necessary funding, or are completely overlooked, because of the demographic makeup or gender of their founders. People with non-traditional and extracurricular experiences that qualify them for coding jobs are being screened out of the recruitment process due to their varied backgrounds.

            Now, I fear we’re headed down a similar path with Artificial Intelligence. AI technologies on the market are beginning to display intentional and unintentional biases – from talent search technology that groups candidate resumes by demographics or background to insensitive auto-fill search algorithms. It applies outside of the business world as well – from a social platform discerning ethnicity based on assumptions about someone’s likes and interests, to AI assistants being branded as female with gender-specific names and voices. The truth is that bias in AI will happen unless it’s built with inclusion in mind. The most critical step in creating inclusive AI is to recognize how bias infects the technology’s output and how it can make the ‘intelligence’ generated less objective.

            We are at a crossroads. 

            The good news: it’s not too late to build an AI platform that conquers these biases with a balanced data set upon which AI can learn from and develop virtual assistants that reflect the diversity of their users.This requires engineers to responsibly connect AI to diverse and trusted data sources to provide relevant answers, make decisions they can be accountable for and reward AI based on delivering the desired result. 

            Broadly speaking, attaching gendered personas to technology perpetuates stereotypical representations of gender roles. Today, we see female presenting assistants (Amazon’s Alexa, Microsoft’s Cortana, Apple’s Siri) being used chiefly for administrative work, shopping and to conduct household tasks. Meanwhile, male presenting assistants (IBM’s Watson, Salesforce’s Einstein, Samsung’s Bixby) are being used for grander business strategy and complex, vertical-specific work.

            I believe AI developers should take gender out of the virtual assistant picture completely. Give virtual assistants a personality. Give them a purpose. But let’s not give them a gender. After all, people use virtual assistants to access vital, relevant and sometimes incredibly random information. Assigning a gender adds no value to the human benefits found in this brand of technology.

            The most human step in taking bias out of the equation is hiring a diverse team to code the AI innovations of tomorrow. Homogeneity limits and dilutes innovation. It’s absolutely vital for AI developers and innovators to hire talent from different cultures, backgrounds and educational pedigrees. AI engineers that create teams of people who approach challenges from different perspectives and embrace change will be more successful in creating AI that addresses real world business and consumer issues. The central goal of the AI community should be to build technologies that truly achieve diversity, inclusion and, ultimately, full equity through utility. 

            Ultimately, I think that AI presents the world (no exaggeration) with an opportunity to correct the all-too-human tendency toward both intentional and unconscious biases. In the tech world, this extends to humans interacting with technology in daily life. It impacts markets embracing new innovations, companies hiring from a diverse talent pool and venture capitalists listening to early stage investor pitches without prescreening who is delivering them. If humans can ethically and responsibly build – and continue to innovate upon – unbiased AI, they will play a small, but significant role in using technology to shift society in the necessary direction of acceptance and equality.

            Kriti Sharma is the vice president of AI at Sage Group, a global integrated accounting, payroll and payment systems provider. She is also the creator of Pegg, the world’s first AI assistant for accounting, with users in 135 countries.

            Read more: http://mashable.com/2017/11/06/artificial-intelligence-ai-bias/

            The U.S. government’s proposal to kill net neutrality is even worse than we expected

            Image: Getty Images

            Few who follow the Federal Communications Commission (FCC) and the history of its efforts to enshrine network neutrality rules into law were surprised yesterday when Chairman Ajit Pai announced that he would make public a proposal to deregulate broadband Internet access by “reclassifying” it as an information service under the Communications Act of 1934. 

            But many expected the Chairman to at least propose retaining some of the rules that protect consumers and competition online, like a prohibition against broadband providers blocking or throttling online content and services. After all, since 2002 FCC chairs of both parties believed that at a minimum, FCC policy should ensure that consumers are able to access the content, applications, and services of their choosing without interference by gatekeeping broadband providers.

            Not Pai. In doing away with the 2015 rules that prohibit broadband providers from discriminating against or favoring certain content, applications and services (that is, no blocking, no throttling, no fast lanes and a general rule against discrimination), Pai has radically departed from bipartisan FCC precedent. This opens the door for companies like Comcast, AT&T, Verizon, and Charter to pick winners and losers on the Internet by controlling which online companies get faster and better quality of service and at what price. 

            Sounds bad, right? Believe it or not, the proposed order is worse than that. 

            The proposed order would leave broadband providers largely if not completely free of oversight

            While there’s a lot of focus on repeal of the rules, even more damaging is the proposal to reverse  the FCC’s decision under Tom Wheeler to classify broadband Internet access as an essential “telecommunications service” subject to Title II of the Communications Act. Without such a ruling, the 2015 rules would not have been possible in the first place. 

            Reversing that classification would do more than invalidate the rules. It would also remove the FCC’s ability to protect consumers and competition in the broadband market. Among other things, Title II gives the FCC the legal power to protect consumers from fraudulent billing, price gouging, anticompetitive behavior, data breaches, and other practices that violate users’ privacy.  

            Chairman Pai’s answer is that the Federal Trade Commission (FTC) “will once again be able to police ISPs, protect consumers, and promote competition, just as it did before 2015.” What he doesn’t say is that the FTC, unlike the FCC, doesn’t have the power to make rules that protect consumers and innovators before they are harmed. Nor does he say that the FTC’s authority wouldn’t prohibit fast lanes, blocking or throttling so long as the broadband provider tells you it’s engaging in those practices. 

            Finally, there’s nothing the FTC can do if one day your broadband provider decides to double its prices. As FTC Commissioner Terrell McSweeny testified earlier this month: “[i]t is wrong to assume that a framework that relies solely on backward-looking consumer protection and antitrust enforcement can provide the same assurances to innovators and consumers as the forward-looking rules contained in the FCC’s Open Internet Order.”

            Moreover, it’s unclear whether the FTC will be able to police some broadband providers at all. Still pending in the 9th Circuit Court of Appeals is a case that holds that if a broadband provider also provides a service regulated under Title II (for example, landline and mobile phone service), then the FTC has no legal authority to oversee its practices. Should that case stand, broadband providers, nearly all which provide some Title II services, would be entirely free of oversight from both the FCC and FTC.

            The proposed order would prohibit states and localities from protecting their citizens

            Not content to repeal the pro-consumer net neutrality rules and neuter his agency, Pai is also proposing to prohibit states and localities from adopting their own broadband consumer protection laws, including laws that protect consumer privacy. 

            In some circumstances, a federal agency like the FCC can “preempt” state and local laws and rules when they are inconsistent with federal laws and rules. Comcast and Verizon asked for this preemption after Congress repealed the FCC’s strong broadband privacy rules and some 16 states introduced laws that would protect users’ privacy. As usual, Pai gave these powerful companies exactly what they asked for.  

            The hypocrisy is staggering. When the FCC in 2015 voted to help consumers by pre-empting the laws of two states that prohibit communities from expanding and building their own broadband networks, Pai dissented vociferously. In this case, where the FCC is removing pro-consumer protections, Pai is delighted to preempt the states from ensuring that their citizens are protected from anti-consumer and anti-competitive practices of broadband companies. The result? Broadband providers win and you lose. 

            What’s next?  

            Pai’s proposed order is now “circulating” among the other four Commissioners, some of whom may offer edits to the document. For the next two weeks, the FCC will take public comment on the proposal and then one week before the FCC’s December 14 meeting, it will go into its “Sunshine” period, in which comment from the public is prohibited. 

            Pai made clear that he doesn’t value public comments, so the best thing for you to do is to contact your representatives in Congress. Now. Just yesterday, some 175,000 calls opposing the proposal went to members of Congress. The goal is to get Republicans to urge Pai not to proceed once they recognize that repeal of the net neutrality rules, like repeal of the broadband privacy rules before it, is extremely unpopular and will hurt them at the ballot box in 2018. 

            If that doesn’t happen, the FCC will vote on Pai’s proposed order on December 14, where it is expected to pass. After that, get ready for a bunch of lawsuits and at least an 18-month to two-year wait for a court to decide the fate of the rules and the FCC’s ability to protect consumers and competition.

            Gigi Sohn is a Fellow with Georgetown Law’s Institute for Technology Law & Policy, the Open Society Foundations and Mozilla. She served as Counselor to former FCC Chairman Tom Wheeler from November 2013-December 2016.

            Read more: http://mashable.com/2017/11/22/net-neutrality-proposal-worse-than-you-think/

            AT&T’s DirecTV Is Giving Refunds on NFL Packages Due to Protests

            Subscribers to AT&T Inc.’s DirecTV NFL Sunday Ticket who want to cancel the service because of football players’ national anthem protests can get refunds, according to customer service representatives.

            The protests, which started with some players kneeling during the anthem to protest racial inequality, has expanded to teams and even owners linking arms in a show of unity. The issue has been magnified by tweets from President Donald Trump, who called the protests “disgraceful” and encouraged fans to boycott the NFL.

            AT&T is the exclusive home of the Sunday Ticket, which offers the full slate of Sunday afternoon NFL games. The telecommunications company declined to comment.

            The TV football package costs almost $300 a season, though AT&T offers various promotions and monthly pricing options.

            DirecTV normally has a no-cancellation policy for Sunday Ticket. The Wall Street Journal reported the refunds earlier Tuesday.

              Read more: https://www.bloomberg.com/news/articles/2017-09-26/at-t-s-directv-is-giving-trump-supporters-refunds-on-nfl-package