Latest / The Infographics Show Podcast / What Was It Like to Be a Scammer in 1988?

Transcript

What Was It Like to Be a Scammer in 1988? · The Infographics Show Podcast

• 0:10
  Speaker 1: Picture of the Year nineteen eighty eight. Let's let's make
• 0:19
  Speaker 1: it cinematic, like really fast paced.
• 0:21
  Speaker 2: Oh, I like where this is going.
• 0:22
  Speaker 1: Yeah, so we are cutting between three very different scenes.
• 0:26
  Speaker 1: Scene one, a sweaty, totally unmarked office in Santa Barbara, California, like.
• 0:31
  Speaker 2: A real claustrophobic setup.
• 0:32
  Speaker 1: Exactly. The air conditioning is barely fighting the summer heat.
• 0:35
  Speaker 1: You've got this telemarketer sitting at a tiny, cheap partition
• 0:40
  Speaker 1: desks packed in there. Right, A cheap plastic phone is
• 0:42
  Speaker 1: pressed hard to his ear and he is desperately pitching
• 0:47
  Speaker 1: this like slimsy ten dollars booklet to a hopeful dreamer
• 0:51
  Speaker 1: on the other end of the line.
• 0:52
  Speaker 2: Okay, cut the scene two across the country, the total
• 0:56
  Speaker 2: illusion of Wall Street, A pristine, regional broke office.
• 1:00
  Speaker 1: Oh, a totally different vibe.
• 1:01
  Speaker 2: Completely. A slick broker in a sharply tailored suit is
• 1:05
  Speaker 2: leaning back in his high end ergonomic chair. He is
• 1:09
  Speaker 2: executing this highly orchestrated psychological.
• 1:11
  Speaker 1: Script on a sophisticated investor.
• 1:12
  Speaker 2: Right. His target is a seasoned investor, but his product
• 1:16
  Speaker 2: is absolutely worthless Penny stock Man.
• 1:19
  Speaker 1: Okay. Scene three, a dimly lit alleyway in the dead.
• 1:23
  Speaker 2: Of night getting dramatic very.
• 1:25
  Speaker 1: A teenager is waist deep in a Pacific Bell corporate dumpster.
• 1:29
  Speaker 1: He's literally digging through the trash, searching what's he looking for,
• 1:34
  Speaker 1: pulling out discarded technical manuals and internal company directories. He
• 1:38
  Speaker 1: isn't looking for money. He is preparing to hack the
• 1:41
  Speaker 1: global telephone network.
• 1:43
  Speaker 2: Three completely different worlds, three entirely different methods, but there.
• 1:47
  Speaker 1: Is one unifying thread connecting them.
• 1:49
  Speaker 2: All exactly the telephone network.
• 1:51
  Speaker 1: Welcome to be on infographics. We look past the surface
• 1:55
  Speaker 1: data to uncover the hidden architecture of the world around us.
• 1:58
  Speaker 2: And if you love this kind of fast documentary style
• 2:01
  Speaker 2: exploration into how things really work, take a quick second
• 2:04
  Speaker 2: and drop a five star rating.
• 2:05
  Speaker 1: On the show. It genuinely helps us keep pulling back
• 2:07
  Speaker 1: at the curtain for you. Today, we have a massive
• 2:11
  Speaker 1: story to unpack it and a fascinating one.
• 2:13
  Speaker 2: We are going to explore the golden age of the
• 2:15
  Speaker 2: American scam. We are looking at the invisible networks that
• 2:19
  Speaker 2: fueled it right, and.
• 2:20
  Speaker 1: We're tracking how the psychology of fraud evolved perfectly in
• 2:25
  Speaker 1: step with modern technology.
• 2:26
  Speaker 2: It's really a story of human vulnerability.
• 2:29
  Speaker 1: It is and I want to set the stakes right
• 2:31
  Speaker 1: now for you listening. This isn't just a dry history lesson.
• 2:34
  Speaker 1: Think of this as a thriller.
• 2:36
  Speaker 2: Definitely. The tools of deception have changed drastically since nineteen
• 2:40
  Speaker 2: eighty eight. I mean, we have smartphones in AI now, but.
• 2:43
  Speaker 1: The vulnerabilities of the human mind, they have not changed
• 2:48
  Speaker 1: one bit, not at all. This is about understanding the
• 2:51
  Speaker 1: pure mechanics of manipulation. The goal is to help you
• 2:55
  Speaker 1: spot the exact same traps hiding in your own daily
• 2:59
  Speaker 1: life right now.
• 3:00
  Speaker 2: And it all starts at the bottom, like the grunt
• 3:02
  Speaker 2: work of deception.
• 3:03
  Speaker 1: The absolute bottom feeding tier of the fraud food chain.
• 3:07
  Speaker 2: Yeah, the low level boiler room. Let's zoom back in
• 3:10
  Speaker 2: on that sweaty office in Santa Barbara you mentioned.
• 3:12
  Speaker 1: The physical reality of this hustle is staggering when you
• 3:15
  Speaker 1: really look at it. We are talking about places like
• 3:17
  Speaker 1: Broughton Hall Publishing.
• 3:19
  Speaker 2: Located at thirty five to fifty four State Street right right.
• 3:21
  Speaker 1: If you walk by this building on a Tuesday afternoon,
• 3:25
  Speaker 1: you would never know what was happening. Inside. It was completely.
• 3:27
  Speaker 2: Unmarked, just a totally anonymous building exactly.
• 3:30
  Speaker 1: But inside it was a literal assembly line of deception.
• 3:34
  Speaker 2: You'd have twenty five to thirty sales reps packed elbow
• 3:38
  Speaker 2: to showl, tiny cheap desks. The noise level alone must
• 3:43
  Speaker 2: have been insane.
• 3:44
  Speaker 1: Oh I can't even imagine thirty people talking over each
• 3:47
  Speaker 1: other simultaneously.
• 3:48
  Speaker 2: And the shifts were grueling, four hours of continuous inbound calls,
• 3:54
  Speaker 2: no breaks, just a relentless stream of human interaction.
• 3:58
  Speaker 1: Because this was a high volume, low yield operation. Right,
• 4:01
  Speaker 1: it wasn't about making one thousand dollars on one call.
• 4:04
  Speaker 2: Right, it was about making ten dollars on one hundred calls.
• 4:06
  Speaker 1: So let's look at the actual mechanism of the con
• 4:09
  Speaker 1: How did they get people to call them in the
• 4:10
  Speaker 1: first place.
• 4:11
  Speaker 2: Well, it was a passive lead generation model. They didn't
• 4:14
  Speaker 2: cold call. They just waited for the phone.
• 4:16
  Speaker 1: To ring, which seems counterintuitive for a boiler room. You
• 4:19
  Speaker 1: picture guys aggressively dialing out from the phone book.
• 4:21
  Speaker 2: Sure, but these guys were smarter than that. They placed short,
• 4:25
  Speaker 2: highly manipulative classified ads like where you would find these
• 4:29
  Speaker 2: buried in the back of publications aimed at working class,
• 4:32
  Speaker 2: often rural demographics, think the Weekly World News. Oh wow, okay,
• 4:37
  Speaker 2: The promises in these ads were carefully engineered bait things
• 4:41
  Speaker 2: like for closed homes available for one dollar, which sounds
• 4:45
  Speaker 2: too good to be true, of course, or how to
• 4:47
  Speaker 2: get a job on a cruise ship, how to get
• 4:49
  Speaker 2: a job in TV commercials. They targeted a very specific
• 4:54
  Speaker 2: kind of hope.
• 4:55
  Speaker 1: But the real genius, or like the really deceptive mechanism
• 4:59
  Speaker 1: was the phone number in the ad.
• 5:01
  Speaker 2: Oh yeah, usually an eight zero five area code.
• 5:03
  Speaker 1: This was a deliberate psychological trick. In nineteen eighty eight,
• 5:06
  Speaker 1: toll free eight hundred numbers existed and were very popular
• 5:10
  Speaker 1: for businesses.
• 5:10
  Speaker 2: So the eight zero five area code looked just similar
• 5:14
  Speaker 2: enough to an eight hundred number.
• 5:15
  Speaker 1: Exactly to trick a casual reader flipping through a tabloid.
• 5:19
  Speaker 1: They thought they were making a free call, but it.
• 5:21
  Speaker 2: Was a full charge long distance call to Santa Barbara.
• 5:24
  Speaker 2: The victim was losing money before the telemarketer even picked
• 5:27
  Speaker 2: up the phone.
• 5:28
  Speaker 1: That's so cynical. So callers would dial in and the
• 5:31
  Speaker 1: ad would tell them to ask for a specific extension
• 5:34
  Speaker 1: like extension T one zero one eight or J ten sixty.
• 5:38
  Speaker 2: And that wasn't to route the call to a specific person, right.
• 5:41
  Speaker 1: Right, No, it was a code. The reps literally had
• 5:44
  Speaker 1: a taped up piece of paper on the wall. The
• 5:47
  Speaker 1: code told them instantly which lie they needed to tell.
• 5:50
  Speaker 2: Wow, so if the caller asked for the T one
• 5:53
  Speaker 2: zero one eight extension, the rep knew they were calling
• 5:57
  Speaker 2: about the airline job.
• 5:58
  Speaker 1: Right, and they instantly launched into a gripped about a
• 6:00
  Speaker 1: massive hiring boom in the aviation.
• 6:02
  Speaker 2: Industry, building up that hope.
• 6:04
  Speaker 1: Yes, once the caller was hooked, once they believed this
• 6:08
  Speaker 1: was their ticket to a better life, the bait and
• 6:10
  Speaker 1: switch occurred.
• 6:11
  Speaker 2: The devastating truth because there were no foreclosed homes, there
• 6:15
  Speaker 2: were no jobs on cruise ships.
• 6:16
  Speaker 1: There were no TV auditions. The pitch was always exactly
• 6:19
  Speaker 1: the same.
• 6:20
  Speaker 2: For just ten dollars, we will send you an exclusive
• 6:22
  Speaker 2: insider booklet that reveals exactly how to secure this opportunity.
• 6:26
  Speaker 1: And the product itself was a joke, a flimsy eight
• 6:29
  Speaker 1: and a half by eleven paper booklet, poorly printed, badly written,
• 6:33
  Speaker 1: just full.
• 6:33
  Speaker 2: Of generic, useless tips you could find in any public
• 6:36
  Speaker 2: library exactly.
• 6:37
  Speaker 1: But here is the critical mechanical detail. They sent it
• 6:40
  Speaker 1: via cash on delivery cod Cood.
• 6:44
  Speaker 2: Is vital to understand here because in the late eighties,
• 6:48
  Speaker 2: handing your credit card number over the phone to a
• 6:50
  Speaker 2: stranger wasn't as common as it is today.
• 6:53
  Speaker 1: People are skeptical.
• 6:54
  Speaker 2: Right see, I felt safe. You didn't pay until the
• 6:56
  Speaker 2: physical envelope arrived at your door. You handed the cash
• 6:59
  Speaker 2: directly to the United States Postal carrier.
• 7:02
  Speaker 1: Oh wow, so it borrowed the authority of the federal
• 7:05
  Speaker 1: government to legitimize a ten dollars scam.
• 7:07
  Speaker 2: Exactly. When I look at this operation, the best modern
• 7:10
  Speaker 2: analogy is a digital clickbait farm. It's a volume game.
• 7:14
  Speaker 1: You cast a massive, incredibly cheap net with those classified ads.
• 7:18
  Speaker 2: Yeah, you don't care that ninety nine percent of people
• 7:20
  Speaker 2: ignore the ad. In fact, you want them to ignore it.
• 7:23
  Speaker 2: You are specifically filtering for the one.
• 7:25
  Speaker 1: Percent, most desperate, the most vulnerable.
• 7:28
  Speaker 2: Right You are sifting the population for people in economically
• 7:31
  Speaker 2: depressed towns, people in Hemmet, California, Murphrey'sboro, Tennessee. You are
• 7:36
  Speaker 2: filtering for people who desperately need a miracle.
• 7:39
  Speaker 1: And the culture inside that boiler room really reflected the
• 7:43
  Speaker 1: profound cynicism of the business.
• 7:45
  Speaker 2: It was absurd, it was deeply demoralizing.
• 7:48
  Speaker 1: The hijinks were incredible. I read that the reps didn't
• 7:51
  Speaker 1: even take their own scam seriously. They were bored out
• 7:54
  Speaker 1: of their.
• 7:54
  Speaker 2: Minds, burnt out, probably.
• 7:56
  Speaker 1: Oh completely. Some reps would do fake British accents on
• 7:59
  Speaker 1: them calls, just to entertain themselves and the guys sitting
• 8:03
  Speaker 1: at the desk next to them.
• 8:04
  Speaker 2: No way.
• 8:05
  Speaker 1: Yes, sometimes they would make each other laugh so hard
• 8:08
  Speaker 1: at their own ridiculous accents that they just had to
• 8:11
  Speaker 1: hang up on the collar, which.
• 8:12
  Speaker 2: Tells you everything you need to know about the primitive
• 8:14
  Speaker 2: incentive structures at play.
• 8:16
  Speaker 1: There was no real management right.
• 8:18
  Speaker 2: No quality control listening in on the calls. It was
• 8:21
  Speaker 2: just raw, unadulterated volume. A supervisor might walk in and
• 8:27
  Speaker 2: literally tape a crisp ten dollar bill to the drywall.
• 8:30
  Speaker 1: Just a ten dollar bill.
• 8:32
  Speaker 2: Yeah, he would shout that the first rep to secure
• 8:34
  Speaker 2: twenty side deliveries that day won the ten bucks.
• 8:38
  Speaker 1: Stop and think about the pure mechanics of that incentive.
• 8:41
  Speaker 1: Ten dollars.
• 8:42
  Speaker 2: That was the bonus, That was the grand prize to
• 8:44
  Speaker 2: motivate a human being, to push twenty desperate people into
• 8:47
  Speaker 2: buying a completely worthless pamphlet.
• 8:50
  Speaker 1: It was a purely transactional culture. It completely and utterly
• 8:53
  Speaker 1: dehumanized the victims because.
• 8:55
  Speaker 2: They were not struggling single mothers or out of work mechanics.
• 8:59
  Speaker 2: To them, they were marks.
• 9:01
  Speaker 1: They were just raw numbers on a whiteboard and necessary
• 9:04
  Speaker 1: stepping stone to winning a ten dollar bill.
• 9:06
  Speaker 2: It is brutal, it is predatory, But like I said,
• 9:09
  Speaker 2: that was the bottom tier, the street.
• 9:11
  Speaker 1: Level hustle, the petty theft of the telemarketing world. Yeah,
• 9:15
  Speaker 1: but what happens when we move up the ladder.
• 9:16
  Speaker 2: What happens when the steaks aren't ten dollars but ten
• 9:19
  Speaker 2: thousand dollars?
• 9:20
  Speaker 1: The operations stopped looking like sweaty sweatshops, they.
• 9:23
  Speaker 2: Start looking exactly like Wall Street.
• 9:25
  Speaker 1: This brings us to the suit and tie scammers, the
• 9:28
  Speaker 1: mid tier financial brokerages of the nineteen eighties.
• 9:31
  Speaker 2: The illusion of legitimacy in these places was paramount. We
• 9:35
  Speaker 2: were talking about firms like Blinder Robinson in company right.
• 9:38
  Speaker 1: Their growth was explosive, unbelievable.
• 9:40
  Speaker 2: In nineteen eighty they had thirteen offices and thirty million
• 9:44
  Speaker 2: dollars in gross revenues. Okay, by nineteen eighty four, just
• 9:48
  Speaker 2: four years later, twenty four offices and forty one million
• 9:53
  Speaker 2: dollars in revenue.
• 9:54
  Speaker 1: So these weren't guys in T shirts in an unmarked room.
• 9:57
  Speaker 1: They wore bespoke suits. They had beautiful regional offices with
• 10:01
  Speaker 1: mahogany desks and original art on the walls.
• 10:05
  Speaker 2: If you walked in, you felt like you were in
• 10:06
  Speaker 2: the presence of serious institutional wealth.
• 10:09
  Speaker 1: But the machinery humming underneath those mahogany desks was just
• 10:13
  Speaker 1: as aggressive and just as fraudulent as the guys pushing
• 10:17
  Speaker 1: booklets in Santa Barbara.
• 10:19
  Speaker 2: Yeah, they used a highly orchestrated, multi stage psychological warfare tactic.
• 10:24
  Speaker 2: It was an industry standard known as the three call systems.
• 10:28
  Speaker 1: Let's break down the mechanics of a three call system.
• 10:30
  Speaker 1: Why three calls? Why not just pitch them right away?
• 10:33
  Speaker 2: Because you have to build compliance slowly, you have to
• 10:36
  Speaker 2: manufacture trust. Call one is the.
• 10:38
  Speaker 1: Introduction, so it's probably incredibly polite.
• 10:41
  Speaker 2: Very professional. The broker introduces himself, mentions his prestigious sounding firm,
• 10:46
  Speaker 2: and says he just wants to send over some free,
• 10:48
  Speaker 2: high quality financial literature.
• 10:50
  Speaker 1: He's establishing the relationship.
• 10:51
  Speaker 2: Exactly, and he's also sizing up the wallet. He's asking
• 10:55
  Speaker 2: seemingly innocent questions to figure out exactly how much liquid
• 10:58
  Speaker 2: capital this person has access to.
• 11:00
  Speaker 1: Clever Call two happens a few days or weeks later.
• 11:04
  Speaker 2: This is the touch base or the sizzle call. The
• 11:08
  Speaker 2: script here is fascinatingly manipulative. Brokers were explicitly trained to
• 11:14
  Speaker 2: say something along the lines of our research department is
• 11:18
  Speaker 2: working on something that looks very exciting.
• 11:20
  Speaker 1: Just planting the seed.
• 11:21
  Speaker 2: The numbers are incredible. As soon as the final report
• 11:25
  Speaker 2: is put together, I will be back to you.
• 11:26
  Speaker 1: That is brilliant. It creates massive anticipation.
• 11:29
  Speaker 2: It implies exclusivity. The victim feels like they are being
• 11:33
  Speaker 2: let in behind the velvet rope of high finance.
• 11:35
  Speaker 1: It's pure fomo fear of missing out. The broker hangs
• 11:38
  Speaker 1: up before the client can even ask what the stock is, right.
• 11:41
  Speaker 2: They let that anxiety and greed simmer for a few days.
• 11:44
  Speaker 2: Then comes call three, the pitch, the big one. This
• 11:48
  Speaker 2: usually happened during what the firm called cell week. This
• 11:50
  Speaker 2: was a specific week when senior management revealed the monthly
• 11:53
  Speaker 2: house stock.
• 11:54
  Speaker 1: Let me define house stock because it's a critical mechanism
• 11:57
  Speaker 1: of the fraud. A house stock is a stock the
• 11:59
  Speaker 1: broker itself is underwriting and making a market for.
• 12:02
  Speaker 2: They control the supply, they control the narrative.
• 12:05
  Speaker 1: It is usually a totally unproven, low priced over to
• 12:09
  Speaker 1: counter penny stock, like a show company, like.
• 12:12
  Speaker 2: A notorious one called American Leisure.
• 12:14
  Speaker 1: Right, it had no real business, no real assets, just
• 12:17
  Speaker 1: a ticker symbol in a story.
• 12:19
  Speaker 2: So during cell week, the broker calls the client back
• 12:22
  Speaker 2: and hits them hard, high pressure, high volume urgency.
• 12:27
  Speaker 1: Like the research is in, the window is closing. You
• 12:30
  Speaker 1: need to buy this house stock right now before the
• 12:32
  Speaker 1: institutional buyers lock us out.
• 12:34
  Speaker 2: But I have to push back here. I look at
• 12:36
  Speaker 2: this system and a major question jumps out at me.
• 12:38
  Speaker 1: What's up?
• 12:39
  Speaker 2: The victims buying these stocks weren't the desperate people reading
• 12:42
  Speaker 2: the weekly world news. These were supposedly seasoned investors, business owners, doctors, dentists.
• 12:48
  Speaker 1: Right, they have money, They understood.
• 12:50
  Speaker 2: Finance, at least somewhat. How do you trick a rich,
• 12:54
  Speaker 2: educated person who actually knows how the market works?
• 12:56
  Speaker 1: You weaponize data. Smart people rely on data. They want research.
• 13:00
  Speaker 1: They want to see the balance sheets.
• 13:01
  Speaker 2: Okay, so the brokers gave them reports, yes, but they
• 13:05
  Speaker 2: use specific deceptive tactics to create a profound delusion of safety.
• 13:10
  Speaker 2: How do you fake a financial report without going straight
• 13:13
  Speaker 2: to prison for forgery?
• 13:14
  Speaker 1: You don't forge it, you just use an out of
• 13:16
  Speaker 1: date one. There was a famous, highly documented instance involving
• 13:20
  Speaker 1: something called the Bronzon Report.
• 13:22
  Speaker 2: Oh, I've heard of this. The broker uses the Bronzen
• 13:25
  Speaker 2: Report to show the client that the target company is
• 13:28
  Speaker 2: perfectly stable.
• 13:29
  Speaker 1: Right. The client reads the report, sees positive revenue and
• 13:32
  Speaker 1: feels secure.
• 13:33
  Speaker 2: But what they deliberately hide from the investor is that
• 13:36
  Speaker 2: the Bronzon report is completely out of date. The revenue
• 13:40
  Speaker 2: and net loss figures are from a previous, briefly successful
• 13:43
  Speaker 2: quarter years.
• 13:44
  Speaker 1: Ago, exactly at the exact moment of the actual stock purchase.
• 13:49
  Speaker 1: The company was taking massive catastrophic.
• 13:52
  Speaker 2: Losses and the broker knew this.
• 13:53
  Speaker 1: The broker had the current numbers showing those losses sitting
• 13:56
  Speaker 1: right on their desk, They just didn't show them to
• 13:58
  Speaker 1: the client.
• 13:58
  Speaker 2: Wow, the Outdome report was a weapon. It reassured the
• 14:02
  Speaker 2: sophisticated investor. It made a highly speculative, doomed penny stock
• 14:07
  Speaker 2: look like a safe going concern.
• 14:09
  Speaker 1: Its weaponized omission, and honestly, it gets even worse than
• 14:13
  Speaker 1: just hiding bad earnings reports. The outright lied about the
• 14:18
  Speaker 1: fundamental nature of the financial instruments they were selling.
• 14:20
  Speaker 2: You're talking about the FNMA seven disaster.
• 14:23
  Speaker 1: Yes, let's look at that. This is a perfect example
• 14:26
  Speaker 1: of how devastating these lies could be.
• 14:29
  Speaker 2: It is a truly harrowing example of financial ruin. A
• 14:32
  Speaker 2: broker calls an investor. He doesn't pitch a penny stock.
• 14:35
  Speaker 2: He pitches a government security.
• 14:37
  Speaker 1: He calls it rock solid, safe as houses.
• 14:39
  Speaker 2: The investor, who is inherently conservative with his money, thinks
• 14:43
  Speaker 2: he is buying a stable SIPC insured government bond.
• 14:47
  Speaker 1: And SIPT insurance is like FDIC insurance for bank accounts.
• 14:51
  Speaker 2: Right, Yes, it protects investors if their brokerage firm goes bankrupt.
• 14:55
  Speaker 2: The investor believes there is a federal safety net under
• 14:57
  Speaker 2: this transaction.
• 14:59
  Speaker 1: Exactly, But it was a complete and utter misrepresentation. The
• 15:03
  Speaker 1: broker deliberately hid the extreme risk. He hid the fact
• 15:07
  Speaker 1: that the security was highly unauthorized and not backed by
• 15:10
  Speaker 1: the government guarantees he implied.
• 15:11
  Speaker 2: And worse, far worse, he hid the mechanical dangers of
• 15:15
  Speaker 2: margin buying.
• 15:16
  Speaker 1: Margin buying is the fatal blow here. For those who
• 15:19
  Speaker 1: aren't familiar, buying on margin means you are borrowing money
• 15:23
  Speaker 1: from your brokerage to make the trade.
• 15:24
  Speaker 2: You put up a fraction of the cost, and the
• 15:26
  Speaker 2: broker loans you the rest. It acts as an amplifier.
• 15:29
  Speaker 1: It's like buying a house with a tiny down payment.
• 15:32
  Speaker 1: If the house value goes up, your return on your
• 15:35
  Speaker 1: actual cash investment is massive.
• 15:37
  Speaker 2: But if a house value crashes, you don't just lose
• 15:39
  Speaker 2: your down payment. You suddenly owe the bank the entire
• 15:42
  Speaker 2: balance of the loan immediately.
• 15:44
  Speaker 1: The broker executed this trade on margin without the client
• 15:47
  Speaker 1: fully understanding the catastrophic downside risk, and.
• 15:50
  Speaker 2: The result was total devastation. The market moves against the
• 15:54
  Speaker 2: unauthorized security. The value plum is.
• 15:57
  Speaker 1: The victim is sitting at home completely unaware when he
• 16:00
  Speaker 1: suddenly receives a mail gram a margin call.
• 16:03
  Speaker 2: A formal demand from the brokerage to instantly deposit fourteen
• 16:07
  Speaker 2: thousand dollars in cash to cover the losses on the
• 16:09
  Speaker 2: borrowed money.
• 16:10
  Speaker 1: The victim doesn't even understand what he's reading. He thought
• 16:13
  Speaker 1: he bought a safe government bond. How can he owe
• 16:15
  Speaker 1: fourteen thousand dollars.
• 16:17
  Speaker 2: He ends up losing nineteen thousand dollars in total, his
• 16:20
  Speaker 2: entire savings completely wiped out by a guy in a
• 16:24
  Speaker 2: nice suit over the telephone.
• 16:25
  Speaker 1: The sophistication of the pitch was incredibly high. The complex
• 16:29
  Speaker 1: language of finance margin, SIPC, government securities was used as
• 16:34
  Speaker 1: a cloak to hide outright theft.
• 16:36
  Speaker 2: But who are they really targeting with these aggressive tactics.
• 16:39
  Speaker 2: Who was consistently on the other end of the line
• 16:41
  Speaker 2: getting wiped out by margin calls?
• 16:44
  Speaker 1: That brings us to the darkest part of this entire ecosystem,
• 16:47
  Speaker 1: the prey, the predators, and the sucker list.
• 16:50
  Speaker 2: The primary targets for these high level boiler rooms were
• 16:54
  Speaker 2: overwhelmingly the elderly.
• 16:55
  Speaker 1: The psychological realities of the era made them the absolute
• 16:58
  Speaker 1: ideal targets. The scammers knew exactly what demographic profile yielded
• 17:03
  Speaker 1: the highest returns.
• 17:04
  Speaker 2: Older folks were often home during the middle of the day.
• 17:07
  Speaker 2: They actually answered the landline when it rang.
• 17:09
  Speaker 1: They were often lonely, right.
• 17:10
  Speaker 2: Yeah, They were eager to just chat with a friendly,
• 17:12
  Speaker 2: professional sounding voice. They didn't hang up immediately like a
• 17:15
  Speaker 2: busy executive would.
• 17:16
  Speaker 1: More importantly, they possessed substantial life savings. They had pensions,
• 17:21
  Speaker 1: retirement accounts, paid off homes, and.
• 17:23
  Speaker 2: Crucially, they grew up in a generational era where a
• 17:26
  Speaker 2: person's word was their bond. They were accustomed to doing
• 17:30
  Speaker 2: business on a handshake.
• 17:32
  Speaker 1: So they were highly trusting of oral guarantees made over
• 17:35
  Speaker 1: the telephone. They didn't demand to see thirty pages of
• 17:38
  Speaker 1: fine print before agreeing to a deal.
• 17:40
  Speaker 2: Which made them incredibly vulnerable. But here's the most brutal
• 17:44
  Speaker 2: cynical concept I found while looking into this, the concept
• 17:47
  Speaker 2: of repeat.
• 17:48
  Speaker 1: Victimization, the sucker list.
• 17:51
  Speaker 2: It is a horrific industry term, but it was the
• 17:53
  Speaker 2: backbone of the entire scam economy. If an investor fell
• 17:57
  Speaker 2: for a scam, if they actually wrote a check and
• 17:59
  Speaker 2: mailed it to a boiler room, their ordeal was not over.
• 18:02
  Speaker 1: It was just beginning. Their name was elevated. They were
• 18:05
  Speaker 1: placed on a highly valued sucker list.
• 18:07
  Speaker 2: And these lists were literal currency. They were traded. They
• 18:11
  Speaker 2: were sold for massive premiums between different boiler rooms all
• 18:14
  Speaker 2: across the country.
• 18:15
  Speaker 1: The logic of the scammer is perfectly ruthless. If you
• 18:18
  Speaker 1: fail for it once, you will fall forward again.
• 18:20
  Speaker 2: You have definitively proven that you possessed the exact psychological
• 18:24
  Speaker 2: vulnerabilities the scammers exploit. You trust too easily, you are
• 18:28
  Speaker 2: too polite to hang up. You have liquid capital, You.
• 18:32
  Speaker 1: Are the perfect mark. It led to highly specialized secondary scams,
• 18:36
  Speaker 1: things like the consolidation scam. They knew you had already
• 18:39
  Speaker 1: been robbed and they used that trauma against you.
• 18:42
  Speaker 2: The gemstone scam is a perfect, sickening example of how
• 18:46
  Speaker 2: this consolidation mechanism worked. Walk me through the psychology of that.
• 18:49
  Speaker 1: Okay, so a victim has already lost money, say five
• 18:53
  Speaker 1: thousand dollars buying bogus, completely worthless gemstones from a previous
• 18:58
  Speaker 1: boiler room a year ago.
• 18:59
  Speaker 2: Right, they are sitting on a safe full of colored glass,
• 19:02
  Speaker 2: deeply ashamed, desperate to recoup their lost retirement funds.
• 19:05
  Speaker 1: Then the phone rings. A new caller contacts them, sounding
• 19:08
  Speaker 1: incredibly professional, perhaps claiming to be from a legitimate sounding
• 19:12
  Speaker 1: appraisal firm.
• 19:13
  Speaker 2: And they say, great news. We have been reviewing your portfolio.
• 19:16
  Speaker 2: We have found a wealthy foreign buyer who wants to
• 19:18
  Speaker 2: purchase your entire gemstone collection.
• 19:21
  Speaker 1: And he wants to pay a massive premium. You are
• 19:24
  Speaker 1: going to get all your money back and then some.
• 19:26
  Speaker 2: The victim is thrilled. It's a miracle away out of
• 19:29
  Speaker 2: the shame in the financial hole. The relief must be overwhelming.
• 19:33
  Speaker 1: But then the trap snap shut. There's a catch. The
• 19:37
  Speaker 1: buyer is very particular this gamra sets. He only buys
• 19:40
  Speaker 1: complete matching sets.
• 19:42
  Speaker 2: You have the Rubies and the Sapphires, but you are
• 19:45
  Speaker 2: missing one specific high grade emerald. The deal cannot go
• 19:49
  Speaker 2: through without it.
• 19:49
  Speaker 1: You just need to buy this one more stone from
• 19:51
  Speaker 1: us to complete the collection. Send us two thousand dollars
• 19:54
  Speaker 1: for the emerald and we will seal the one hundred
• 19:57
  Speaker 1: thousand dollars deal tomorrow.
• 19:58
  Speaker 2: It's twisted. It is a reverse subscription model of fraud.
• 20:02
  Speaker 2: Once you opt in by being victimized the first time,
• 20:04
  Speaker 2: they just keep aggressively upgrading your tier of exploitation.
• 20:08
  Speaker 1: They promise salvation, but the price of salvation is just
• 20:11
  Speaker 1: one more fake gemstone. They drained the victim until there
• 20:14
  Speaker 1: is absolutely nothing left to take.
• 20:17
  Speaker 2: And the producers of these scams the unseen masterminds running
• 20:20
  Speaker 2: the boiler rooms. They designed these operations almost like Hollywood
• 20:23
  Speaker 2: executives greenlighting movie sequels.
• 20:26
  Speaker 1: They follow the trends. It's the blueprint of fraud. They
• 20:29
  Speaker 1: didn't invent new concepts. They parasitically attached themselves to the
• 20:33
  Speaker 1: real economy exactly.
• 20:35
  Speaker 2: They constantly look for the hottest, most legitimate, fastest growing
• 20:39
  Speaker 2: industries in the real world. In the early nineties it
• 20:43
  Speaker 2: was the explosion of telecommunications.
• 20:45
  Speaker 1: And paid your networks, and in the late nineties it
• 20:47
  Speaker 1: was the dot com boom. They built elaborate, imaginary investment
• 20:52
  Speaker 1: programs that perfectly mimic the blueprints of real successful companies.
• 20:56
  Speaker 2: They sold the exact same dream that legitimate stockbroke we're
• 21:00
  Speaker 2: selling on CNBC. They use the same buzzwords, they promise
• 21:04
  Speaker 2: the same revolutionary.
• 21:05
  Speaker 1: Returns, just without any actual company product or revenue behind it.
• 21:09
  Speaker 1: They rode the cultural zeitgeist. If everyone on the evening
• 21:12
  Speaker 1: news is getting rich in tech stocks, the boiler room
• 21:15
  Speaker 1: sells fake textocks.
• 21:16
  Speaker 2: The victim thinks they're finally getting in on the boom
• 21:18
  Speaker 2: they keep reading about on the newspaper.
• 21:20
  Speaker 1: So we have this massive hidden economy of boiler rooms
• 21:24
  Speaker 1: using the physical phone lines to systematically drain the savings
• 21:27
  Speaker 1: of the elderly. It's pure greed.
• 21:30
  Speaker 2: But what is truly fascinating is that at the exact
• 21:33
  Speaker 2: same moment in time, around nineteen eighty eight, an entirely
• 21:36
  Speaker 2: different subculture was obsessing over those exact same phone.
• 21:40
  Speaker 1: Lines, but for a very different kind of thrill. We
• 21:43
  Speaker 1: are shifting the narrative away from the strip malls and
• 21:46
  Speaker 1: into the bedrooms and basements.
• 21:48
  Speaker 2: Let's explore the digital underground, the freakers, the hackers, and
• 21:52
  Speaker 2: the birth of the bulletin board System the BBS.
• 21:55
  Speaker 1: The origin story of the BBS is incredible and it
• 21:58
  Speaker 1: actually starts a decade earlier. It goes back to the
• 22:00
  Speaker 1: Great Blizzard of nineteen seventy eight in Chicago.
• 22:03
  Speaker 2: Massive storm shuts down the entire city. No one can drive,
• 22:07
  Speaker 2: no one can leave their house.
• 22:08
  Speaker 1: You have two guys, Ward Christensen and Randy Seuss. They
• 22:12
  Speaker 1: are early computer hobbyists. They are snowed in.
• 22:15
  Speaker 2: And they want a way to share technical information and
• 22:17
  Speaker 2: talk to each other without physically meeting at a computer club.
• 22:20
  Speaker 2: So they literally build a.
• 22:22
  Speaker 1: Solution to create the computerized bulletin board System the CBBS.
• 22:26
  Speaker 1: It is the very first public dial up BBS in history.
• 22:30
  Speaker 2: It was a revolutionary concept, a digital meeting place. But
• 22:34
  Speaker 2: to really take off to become a nationwide underground culture,
• 22:38
  Speaker 2: it required specific advancements in hardware.
• 22:41
  Speaker 1: Right the modems. We have to talk about how primitive
• 22:44
  Speaker 1: the early motems were. You had acoustic couplers.
• 22:47
  Speaker 2: If you haven't seen one in an old movie, you
• 22:49
  Speaker 2: literally took your physical telephone handset, the heavy plastic piece
• 22:53
  Speaker 2: you talk into, and shoved it down into two rubber
• 22:56
  Speaker 2: cups on top of.
• 22:57
  Speaker 1: The modem, and the modem would then literally screech audio
• 23:01
  Speaker 1: tones into the phone's microphone to send data.
• 23:04
  Speaker 2: It was slow, prone to errors if a dog barked
• 23:06
  Speaker 2: in the background, and required constant manual interaction. But then
• 23:10
  Speaker 2: came the Pennywhistle.
• 23:11
  Speaker 1: Modem, and more importantly, the absolute game changer, the Haze
• 23:15
  Speaker 1: Smart motive.
• 23:16
  Speaker 2: Oh. The smart modem changed the architecture of communication. It
• 23:20
  Speaker 2: allowed the computer itself to automatically answer a ringing phone
• 23:23
  Speaker 2: line and automatically hang up the phone line when the
• 23:26
  Speaker 2: data transport looked down.
• 23:27
  Speaker 1: You didn't have to sit there physically lifting the handset
• 23:30
  Speaker 1: on and off the cradle. It birthed the autonomous online community.
• 23:38
  Speaker 2: Computers could suddenly talk to other computers in the middle
• 23:40
  Speaker 2: of the night while their owners slept, And.
• 23:42
  Speaker 1: As soon as that community was born, it quickly fractured
• 23:45
  Speaker 1: into different, highly specialized factions. The computer underground was not
• 23:50
  Speaker 1: a single monolith.
• 23:52
  Speaker 2: You had two main camps. You had the pirates and
• 23:55
  Speaker 2: you had the hackers. Let's differentiate them clearly. Who were
• 23:58
  Speaker 2: the pirates, what did they care of?
• 24:00
  Speaker 1: Pirates focused entirely on software distributions or where Z stelled
• 24:06
  Speaker 1: with the Z as it was known in the underground.
• 24:09
  Speaker 2: Their entire subculture revolved around cracking and trading copyrighted video
• 24:13
  Speaker 2: games and expensive utility applications.
• 24:16
  Speaker 1: And it wasn't just a free for all file sharing
• 24:18
  Speaker 1: network like Napster became later. They had a strict, almost
• 24:21
  Speaker 1: military hierarchy, very rigid.
• 24:24
  Speaker 2: At the absolute top of the pyramid, you had the supplier.
• 24:27
  Speaker 2: This was crucial.
• 24:28
  Speaker 1: It was a supplier.
• 24:29
  Speaker 2: The supplier was often an actual insider, someone working at
• 24:32
  Speaker 2: a software publishing company or a teenager working at a
• 24:35
  Speaker 2: retail store like Babbage's. Their job was to physically steal
• 24:39
  Speaker 2: a copy of the game weeks before it was officially
• 24:42
  Speaker 2: released to the public.
• 24:43
  Speaker 1: They passed that physical floppy disc to the cracker.
• 24:46
  Speaker 2: The cracker is the technical genius of the group. They
• 24:49
  Speaker 2: dive deep into the assembly code of the game and
• 24:51
  Speaker 2: manually removed the digital copy protection. They strip away the locks.
• 24:55
  Speaker 1: And then once the game is clean, it goes to
• 24:58
  Speaker 1: the courier.
• 24:59
  Speaker 2: The career's job is pure relentless distribution. They take the
• 25:04
  Speaker 2: cracked software and upload it to pirate BBS's all over
• 25:08
  Speaker 2: the country, moving.
• 25:09
  Speaker 1: The files as fast as possible over the phone line.
• 25:11
  Speaker 2: Exactly. The prestige in the pirate scene came from being
• 25:14
  Speaker 2: the very first group to release a new game. It
• 25:17
  Speaker 2: was a race.
• 25:17
  Speaker 1: That's the pirates. They wanted games. But what about the
• 25:21
  Speaker 1: hackers and the freakers. They looked at the world very differently.
• 25:26
  Speaker 2: Hackers and freakers generally didn't care about playing the latest
• 25:29
  Speaker 2: video game. They cared about systems. They cared about architecture, passwords,
• 25:33
  Speaker 2: access codes.
• 25:34
  Speaker 1: They wanted to understand and manipulate the massive telephone network itself.
• 25:38
  Speaker 2: Enter Kevin Mitnick nineteen eighty eight is the year. He
• 25:41
  Speaker 2: really becomes the poster child for this era. His exploits
• 25:45
  Speaker 2: were legendary and they highlight exactly how this group operated.
• 25:49
  Speaker 1: He was a master of combining physical espionage with digital intrusion.
• 25:53
  Speaker 1: He didn't just sit behind a keyboard.
• 25:55
  Speaker 2: Let's look at the physical espionage, a practice they called.
• 25:58
  Speaker 1: Trashing literally dumpster diving.
• 26:01
  Speaker 2: Yeah.
• 26:01
  Speaker 1: Mitnick would go behind the massive Pacific Bell corporate offices
• 26:05
  Speaker 1: in the middle of the night and physically dig through
• 26:09
  Speaker 1: their connertial trash bins.
• 26:11
  Speaker 2: You're looking for gold mines, of information internal company directories,
• 26:15
  Speaker 2: discarded technical manuals for fun switches.
• 26:18
  Speaker 1: Scraps of paper with account information or difful passwords scribbled
• 26:21
  Speaker 1: on them. Engineers would throw away manuals without realizing they
• 26:25
  Speaker 1: contained the keys to the kingdom.
• 26:26
  Speaker 2: And he used incredibly basic tech by today's standards to
• 26:30
  Speaker 2: weaponize that information, a cheap radio shack computer acoustic couplers.
• 26:35
  Speaker 1: But he combined that basic hardware with stolen MCI long
• 26:39
  Speaker 1: distance calling codes he found in the trash.
• 26:41
  Speaker 2: This was the key. The stolen codes allowed him to
• 26:43
  Speaker 2: bounce his connection around the global network for free, masking
• 26:46
  Speaker 2: his actual location.
• 26:48
  Speaker 1: He used a protocol called telnet. Telnet is a text
• 26:51
  Speaker 1: based protocol that allows one computer to essentially take remote
• 26:54
  Speaker 1: control of another computer over a network.
• 26:57
  Speaker 2: He used it to access massive, secure corporate mainframes.
• 27:02
  Speaker 1: He was everywhere. He jammed the systems at US Leasing.
• 27:05
  Speaker 1: He broke deep into the proprietary network of the Digital
• 27:08
  Speaker 1: Equipment Corporation, which was one of the biggest computer companies
• 27:11
  Speaker 1: in the world at the time.
• 27:12
  Speaker 2: But here is the fascinating paradox of the hacker Ethos
• 27:16
  Speaker 2: during that specific era.
• 27:18
  Speaker 1: Tell me, because on the surface he sounds like a
• 27:21
  Speaker 1: digital terrorist.
• 27:22
  Speaker 2: Unlike the boiler room stammers, who were purely malicious, predatory,
• 27:26
  Speaker 2: and driven entirely by greed, the early hackers were mostly
• 27:30
  Speaker 2: non malicious.
• 27:31
  Speaker 1: They weren't trying to seal thousands of dollars from grandmothers.
• 27:33
  Speaker 1: They weren't draining bank accounts exactly.
• 27:36
  Speaker 2: They valued the power of knowledge. They wanted to see
• 27:39
  Speaker 2: how the system worked. To a true nineteen eighties hacker,
• 27:42
  Speaker 2: actually destroying data, deleting files, or permanently breaking a corporate
• 27:46
  Speaker 2: system was considered bad form.
• 27:49
  Speaker 1: It was amateurish. It was vandalism, not hacking.
• 27:51
  Speaker 2: Right, The ultimate goal, the highest art form, was to
• 27:54
  Speaker 2: get in, map the system, gain super ease or access,
• 27:58
  Speaker 2: look around, and get out without the system administrators ever
• 28:01
  Speaker 2: knowing you were there, leaving no trace.
• 28:04
  Speaker 1: Okay, let me jump in and ask a crucial question. Then,
• 28:06
  Speaker 1: if the hackers were mostly just curious teenagers poking around mainframes,
• 28:12
  Speaker 1: essentially playing a high tech game of hide and seek,
• 28:15
  Speaker 1: why did the federal government treat them like public Enemy
• 28:18
  Speaker 1: number one?
• 28:19
  Speaker 2: While boiler rooms were literally operating out in the open
• 28:22
  Speaker 2: in strip malls across America, stealing millions of actual dollars
• 28:26
  Speaker 2: from citizens.
• 28:27
  Speaker 1: Yeah, exactly, why the massive double standard.
• 28:30
  Speaker 2: It comes down to what they threatened. Boiler rooms threatened
• 28:33
  Speaker 2: individual consumers, one retiree at a time. The government views
• 28:38
  Speaker 2: that as a tragic but manageable consumer protection issue. Hackers,
• 28:42
  Speaker 2: on the other hand, threatened the infrastructure itself.
• 28:45
  Speaker 1: They threatened the grid, the backballs exactly.
• 28:48
  Speaker 2: They were inside the corporate mainframes, they were inside the
• 28:51
  Speaker 2: government networks. They controlled the phone company switches. When a
• 28:54
  Speaker 2: teenager proves they can shut down the routing systems of
• 28:57
  Speaker 2: a major telecom, they are messing with the infrast structure
• 29:00
  Speaker 2: of national commerce.
• 29:01
  Speaker 1: And when you threaten the infrastructure, the hammer comes down
• 29:04
  Speaker 1: hard and fast, and.
• 29:06
  Speaker 2: It absolutely did. The Secret Service, not local police, launched
• 29:10
  Speaker 2: a massive, coordinated crackdown operations Sun Devil.
• 29:14
  Speaker 1: Nineteen eighty nine and nineteen ninety. It was unprecedented. Federal
• 29:18
  Speaker 1: agents and windbreakers raided homes in cities all across the
• 29:21
  Speaker 1: country simultaneously.
• 29:22
  Speaker 2: They kicked down doors, They confiscated computers, floppy disks, even
• 29:26
  Speaker 2: answering machines. They systematically shut down the major dial up
• 29:30
  Speaker 2: underground networks.
• 29:31
  Speaker 1: They legally and physically crushed the hacker scene. So the
• 29:34
  Speaker 1: government crushed the hackers because they illegally bypassed the billing
• 29:38
  Speaker 1: infrastructure of the phone companies. The hackers stole service. But
• 29:43
  Speaker 1: this leads to a massive mind bending pivot in our story.
• 29:47
  Speaker 1: What if a scammer found a way to use that
• 29:49
  Speaker 1: exact same billing infrastructure legally.
• 29:51
  Speaker 2: What if they could use the phone company to literally
• 29:53
  Speaker 2: print money. This is where we enter the era of
• 29:56
  Speaker 2: scaled arbitrage, the nine hundred number gold rush.
• 29:59
  Speaker 1: This is where the story takes a wild turn into
• 30:01
  Speaker 1: the unintended consequences of regulatory loopholes. It all starts with
• 30:05
  Speaker 1: the massive antitrust breakup of AT and T.
• 30:08
  Speaker 2: The federal government shatters the monopoly, and that breakup creates
• 30:12
  Speaker 2: a highly unique, highly vulnerable legal environment.
• 30:16
  Speaker 1: The new smaller, regional bell operating companies, the local phone
• 30:20
  Speaker 1: companies you paid your bill to, were given specific strict
• 30:23
  Speaker 1: rules by the FCC.
• 30:24
  Speaker 2: They were allowed to transmit information over their physical lines,
• 30:28
  Speaker 2: but they were strictly prohibited from creating the content of
• 30:31
  Speaker 2: that information or acting as publishers.
• 30:33
  Speaker 1: They were forced to become common carriers, service bureaus, just
• 30:37
  Speaker 1: dumb pipes carrying audio from point A to point B.
• 30:40
  Speaker 2: They couldn't police what people were saying on the lines.
• 30:43
  Speaker 1: Exactly, and scammers, who are always looking for the newest
• 30:46
  Speaker 1: structural weakness, realized this was the ultimate arbitrage opportunity.
• 30:50
  Speaker 2: They realized they could use the local utility company, the massive,
• 30:54
  Speaker 2: respected local phone company, as their own personal, federally protected
• 30:59
  Speaker 2: collection agent.
• 31:00
  Speaker 1: They set up nine hundred numbers. Unlike eight hundred numbers,
• 31:03
  Speaker 1: which are free to the caller, nine hundred numbers are
• 31:05
  Speaker 1: premium paper call lines. The caller pays a steep permntent fee,
• 31:10
  Speaker 1: and the scammers paired these lines within new technology automated
• 31:14
  Speaker 1: interactive computer telephony audio text menus.
• 31:18
  Speaker 2: Press one for this, press two for that. We all
• 31:21
  Speaker 2: hate those menus today, but back then it was revolutionary
• 31:24
  Speaker 2: for a stammer. The caller dials the number, the computer answers.
• 31:28
  Speaker 1: The scammer doesn't even need a sweaty room full of
• 31:30
  Speaker 1: human reps making fate British accents anymore. It scales infinitely.
• 31:34
  Speaker 2: And the genius part the local phone company bills the
• 31:37
  Speaker 2: caller on their monthly statement, collects the cash, takes a
• 31:41
  Speaker 2: processing fee, and sends the rest of the cut directly
• 31:43
  Speaker 2: to the stammer.
• 31:44
  Speaker 1: The explosion of revenue was staggering. It's hard to overstate.
• 31:48
  Speaker 1: The nine hundred number industry went from sixty million dollars
• 31:51
  Speaker 1: in total revenue in nineteen eighty eight to nine hundred
• 31:54
  Speaker 1: and seventy five million dollars by nineteen ninety one.
• 31:57
  Speaker 2: It became almost a billion dollar industry virtually overnight.
• 32:00
  Speaker 1: And a huge, undeniable chunk of that near billion dollars
• 32:03
  Speaker 1: was pure, unadulterated fraud. Let's look at the mechanics of
• 32:08
  Speaker 1: the Transworld Caurier Services case.
• 32:09
  Speaker 2: It was a classic job information scam, upgraded for the
• 32:12
  Speaker 2: automated age.
• 32:13
  Speaker 1: They run the same cheap classified ads. Need a high
• 32:16
  Speaker 1: paying job, call this number immediately. Desperate unemployed people call
• 32:21
  Speaker 1: the nine hundred number.
• 32:22
  Speaker 2: They sit on the line listening to a slow, rambling
• 32:26
  Speaker 2: recorded message about employment opportunities that don't exist. They never
• 32:30
  Speaker 2: receive the actual job information they were promised.
• 32:33
  Speaker 1: They hang up, disappointed but thinking they just wasted ten
• 32:36
  Speaker 1: minutes of their time. But when their local phone bill
• 32:39
  Speaker 1: arrives at the end of the month.
• 32:40
  Speaker 2: They open the envelope and they are hit with massive
• 32:43
  Speaker 2: hidden charges fifteen to eighteen dollars per call to Transworld
• 32:47
  Speaker 2: Courier Services.
• 32:48
  Speaker 1: It is brilliant and it is profoundly evil. Think about
• 32:52
  Speaker 1: this analogy. It is like a criminal turning your local
• 32:55
  Speaker 1: water company or your electric company into their own personal
• 32:58
  Speaker 1: mob enforcer.
• 33:00
  Speaker 2: Scammer doesn't have to send a guy with a baseball
• 33:02
  Speaker 2: bat to break your legs to get the fifteen dollars.
• 33:04
  Speaker 2: You have to pay the scammer's fifteen dollars charge on
• 33:07
  Speaker 2: your monthly phone bill, or your local phone company will
• 33:09
  Speaker 2: legally shut off your dial tone.
• 33:11
  Speaker 1: You lose your basic ability to call nine to one
• 33:13
  Speaker 1: to one or call your family.
• 33:15
  Speaker 2: The respected phone company does the dirty work for the scammer.
• 33:18
  Speaker 2: They hold the utility hostage, and this created a fascinating, tangled,
• 33:23
  Speaker 2: agonizing legal battle for the regulators.
• 33:26
  Speaker 1: Because regulators in the State Attorney's General I obviously saw
• 33:29
  Speaker 1: this happening and wanted to shut these fraudulent nine hundred
• 33:32
  Speaker 1: numbers down immediately.
• 33:34
  Speaker 2: But they ran straight into a brick wall the United States.
• 33:37
  Speaker 1: Constitution the First Amendment.
• 33:38
  Speaker 2: Yes, the courts had established that nine hundred number messages,
• 33:43
  Speaker 2: even automated sleazy ones, were considered commercial speech. They enjoyed
• 33:49
  Speaker 2: First Amendment protection.
• 33:50
  Speaker 1: The government couldn't just arbitrarily order a phone company to
• 33:53
  Speaker 1: unplug a phone line without massive due process and proving
• 33:56
  Speaker 1: explicit fraud in court, which takes years.
• 34:00
  Speaker 2: How did the FCC finally solve it? Because we don't
• 34:02
  Speaker 2: have this specific problem anymore.
• 34:04
  Speaker 1: They forced an elegant regulatory compromise, the preamble Rule. Walk
• 34:07
  Speaker 1: us through the mechanics of the preamble rule.
• 34:09
  Speaker 2: Well, the FCC couldn't ban the speech, but they could
• 34:12
  Speaker 2: regulate the billing mechanism. They mandated that any nine hundred
• 34:17
  Speaker 2: number call costing more than two dollars flat or more
• 34:20
  Speaker 2: than a certain amount per minute, had to start with
• 34:22
  Speaker 2: a mandatory warning message a preamble.
• 34:25
  Speaker 1: It had to clearly state the exact cost of the
• 34:28
  Speaker 1: call up.
• 34:28
  Speaker 2: Front, and crucially, it had to give the caller a
• 34:30
  Speaker 2: grace period a few seconds to hang up the phone
• 34:33
  Speaker 2: before any charges were legally applied to their bill.
• 34:36
  Speaker 1: This call costs five dollars a minute. Hang up now
• 34:39
  Speaker 1: to avoid charges. We've all heard those warnings on late
• 34:42
  Speaker 1: night commercials.
• 34:43
  Speaker 2: That simple mechanical regulatory fix decimated a massive portion of
• 34:48
  Speaker 2: the automated fraud. The moment victims heard the price, they
• 34:51
  Speaker 2: hung up. The easy money vanished overnight.
• 34:54
  Speaker 1: But it was just one skirmish. The preamble rule didn't
• 34:57
  Speaker 1: end fraud It was a single battle and a deca
• 35:00
  Speaker 1: gid's long cat and mouse game between regulators and scam artists, a.
• 35:03
  Speaker 2: Game that continues to this very second, which brings us
• 35:07
  Speaker 2: to the evolution of evasion. Fraud is never static. It
• 35:10
  Speaker 2: constantly evolves to survive the environment.
• 35:12
  Speaker 1: How do boiler rooms survive when the heat gets turned
• 35:15
  Speaker 1: up by law enforcements. They are highly transient by design.
• 35:19
  Speaker 1: They're built specifically to vanish.
• 35:21
  Speaker 2: If local authorities or a state attorney general starts investigating
• 35:25
  Speaker 2: a boiler room operating in Phoenix, Arizona, the operators don't
• 35:29
  Speaker 2: hire fancy lawyers and stick around to fight it in court.
• 35:32
  Speaker 1: They don't care about their lease. They literally unplug the phones,
• 35:36
  Speaker 1: pack up the highly valuable soccer lists, load up a
• 35:39
  Speaker 1: moving truck, and set up shop in a new state
• 35:42
  Speaker 1: in a matter of weeks.
• 35:43
  Speaker 2: Total mobility. And they used very specific evasion tactics to
• 35:47
  Speaker 2: muddy the legal waters. For example, a boiler room located
• 35:50
  Speaker 2: in Florida would almost never call a victim who actually
• 35:52
  Speaker 2: lived in Florida.
• 35:53
  Speaker 1: They strictly targeted out of state victims. Why because it
• 35:57
  Speaker 1: creates a jurisdictional nightmare.
• 35:58
  Speaker 2: If a grandma in Ohio Io get scammed by a
• 36:01
  Speaker 2: guy in Florida, The local Ohio police can't easily raid
• 36:04
  Speaker 2: a building in Miami, and the Florida police don't care
• 36:07
  Speaker 2: because no Florida citizens are complaining.
• 36:09
  Speaker 1: Exactly, they exploited state lines. They also used private express
• 36:13
  Speaker 1: shipping companies like Setex or ups to send their bogus
• 36:16
  Speaker 1: pamphlets or contracts instead of the US Postal Service.
• 36:20
  Speaker 2: And the mechanical reason for that is brilliant. Using private
• 36:23
  Speaker 2: shippers explicitly avoids the jurisdiction of the Mail Fraud Act.
• 36:28
  Speaker 1: And more importantly, it avoids the US Postal Inspectors. People
• 36:32
  Speaker 1: don't realize this, but the Postal Inspectors are federal law enforcements.
• 36:36
  Speaker 1: They carry guns, they have massive resources, and they are
• 36:39
  Speaker 1: notoriously relentless.
• 36:41
  Speaker 2: Scammers were terrified of them, so they avoided the mail entirely.
• 36:45
  Speaker 2: But here is an even more complex mechanical problem for
• 36:48
  Speaker 2: a scammer. What about processing credit cards?
• 36:51
  Speaker 1: As credit cards became more common, victims wanted to pay
• 36:54
  Speaker 1: with plastic.
• 36:55
  Speaker 2: But if you are a fly by night fraudulent company
• 36:58
  Speaker 2: with no assets, no legitimate bank in the world is
• 37:01
  Speaker 2: going to give you a merchant account to process Visa
• 37:04
  Speaker 2: or MasterCard right.
• 37:06
  Speaker 1: The banks would see the chargebacks and shut them down
• 37:08
  Speaker 1: in a day. So how did they get the money
• 37:10
  Speaker 1: out of the credit card network.
• 37:11
  Speaker 2: They used a covert process called.
• 37:12
  Speaker 1: Factoring breakdown factory. How does a scammer launder credit card transactions?
• 37:18
  Speaker 2: The scammers would approach a struggling, legitimate small business merchant
• 37:22
  Speaker 2: in their local area, say a local florist shop or
• 37:26
  Speaker 2: a pizza parlor, a business that already had a legitimate
• 37:29
  Speaker 2: merchant account with a bank.
• 37:31
  Speaker 1: The scammer would offer the pizza shop owner a deal.
• 37:34
  Speaker 1: I have all these mail order sales, but my bank
• 37:37
  Speaker 1: terminal is broken. If you run my customer's credit card
• 37:40
  Speaker 1: numbers through your pizza shops terminal, I will let you
• 37:43
  Speaker 1: keep ten percent of the gross.
• 37:45
  Speaker 2: So the victim in Ohio thinks they are buying a
• 37:47
  Speaker 2: ten thousand dollars Gemstone investment, but on their credit card
• 37:51
  Speaker 2: statement it shows up as a ten thousand dollars charge
• 37:54
  Speaker 2: to Tony's Pizza in Miami.
• 37:55
  Speaker 1: Exactly. Tony's Pizza collects the cash from the bank, keeps
• 37:59
  Speaker 1: a thousand dollars and hands nine thousand dollars in cash
• 38:02
  Speaker 1: to the scammer. It was a highly effective form of money.
• 38:05
  Speaker 2: Laundering, laundering credit card drafts through small businesses. It's incredible.
• 38:09
  Speaker 2: So with all these evasion tactics, state hopping, private shipping factoring,
• 38:14
  Speaker 2: how did the states actually try to fight back?
• 38:16
  Speaker 1: It was a very messy patchworks. Different states tried vastly
• 38:19
  Speaker 1: different approaches. California, for instance, took a very bureaucratic approach.
• 38:23
  Speaker 2: They passed laws requiring telemarketers to officially register with the state.
• 38:27
  Speaker 2: They instituted a fifty dollars registration fee, and they forced
• 38:30
  Speaker 2: the telemarketers to physically submit their actual sales scripts to
• 38:34
  Speaker 2: the state Attorney General's office for review.
• 38:37
  Speaker 1: It was a hurdle, but a very low one. Scammers
• 38:39
  Speaker 1: gladly paid fifty bucks and submitted watered down fake scripts
• 38:43
  Speaker 1: to the state while reading the real aggressive scripts on
• 38:46
  Speaker 1: the phones.
• 38:47
  Speaker 2: Nevada, however, took a much more aggressive stance. Nevada was
• 38:51
  Speaker 2: tired of being a haven for these transient boiler rooms
• 38:55
  Speaker 2: setting up shop near Vegas.
• 38:56
  Speaker 1: So Nevada decided to hit them where it actually hurt wallet.
• 39:01
  Speaker 1: They implemented a massive six thousand dollars registration fee just
• 39:04
  Speaker 1: to open a phone room, and far more importantly, they
• 39:08
  Speaker 1: required a fifty thousand dollars bond.
• 39:10
  Speaker 2: Explain the mechanics of a bond.
• 39:11
  Speaker 1: In this context, a brond means the telemarketing company has
• 39:14
  Speaker 1: to take fifty thousand dollars in cash and lock it
• 39:17
  Speaker 1: up in an escrow account controlled by the state. They
• 39:20
  Speaker 1: can't touch it. It sits there to secure consumer refunds
• 39:23
  Speaker 1: in case the company is eventually found guilty of fraud.
• 39:26
  Speaker 2: It's an insurance policy for the victims, paid for by
• 39:29
  Speaker 2: the scammer.
• 39:29
  Speaker 1: Exactly, most fly by night boiler rooms couldn't afford to
• 39:33
  Speaker 1: lock up fifty grand or they knew they would eventually
• 39:35
  Speaker 1: lose it to fraud claims, So the bond requirement worked.
• 39:38
  Speaker 1: The scammers packed up and avoided Nevada entirely.
• 39:42
  Speaker 2: But again, state laws just pushed the problem across the
• 39:44
  Speaker 2: border to Utah or Arizona. You need a federal response.
• 39:48
  Speaker 2: The massive federal hammer eventually came down with the implementation
• 39:51
  Speaker 2: of the Telemarketing Sales Rule the TSR.
• 39:54
  Speaker 1: The TSR radically changed the landscape of the industry. It
• 39:58
  Speaker 1: implemented these strict eight am to nine pm calling limits.
• 40:01
  Speaker 1: You no longer harass people in the middle of the night.
• 40:03
  Speaker 1: It banned advanced feed debt relief scams entirely.
• 40:06
  Speaker 2: And most famously, it led to the creation of the
• 40:09
  Speaker 2: National Do Not.
• 40:10
  Speaker 1: Call Registry, a massive structural blow to cold calling boiler rooms.
• 40:14
  Speaker 1: Suddenly millions of numbers were legally off limits. But remember
• 40:18
  Speaker 1: the core thesis of our show today, the game never ends.
• 40:21
  Speaker 2: The vulnerabilities of the human mind remain constant. The delivery
• 40:24
  Speaker 2: mechanism simply evolves to bypass the new laws. Bring us
• 40:28
  Speaker 2: to the modern day. What does the sweaty nineteen eighty
• 40:30
  Speaker 2: eight boiler room look like right now today?
• 40:34
  Speaker 1: Today? It doesn't look like an outbound telemarketing call. It
• 40:37
  Speaker 1: looks like an inbound tech support call.
• 40:39
  Speaker 2: Tech support scams, we have all seen them.
• 40:42
  Speaker 1: You are browsing the web and suddenly you get a
• 40:45
  Speaker 1: massive pop up on your computer screen. It flashes red,
• 40:48
  Speaker 1: It blears an audible alarm through your speakers. It locks
• 40:51
  Speaker 1: up your browser.
• 40:52
  Speaker 2: The text says critical alert. Your computer is infected with
• 40:55
  Speaker 2: a severe virus. Your bank details are being stolen. Call
• 40:59
  Speaker 2: Microsoft Support immediately at this toll free number to lock
• 41:03
  Speaker 2: down your system.
• 41:04
  Speaker 1: It creates instant panic. You call the number, but obviously
• 41:08
  Speaker 1: you aren't calling Microsoft or Apple. You are calling a modern,
• 41:11
  Speaker 1: fully digital boiler room, often located in massive call centers overseas,
• 41:16
  Speaker 1: far beyond the reach of local US police.
• 41:19
  Speaker 2: And here's the most striking data point. The demographics of
• 41:22
  Speaker 2: the victims have not changed one single bit since the
• 41:25
  Speaker 2: penny stock days of nineteen eighty eight.
• 41:27
  Speaker 1: The statistics are staggering and deeply sad. Older adults are
• 41:31
  Speaker 1: five times more likely to lose money to these modern
• 41:33
  Speaker 1: tech support scams than younger.
• 41:35
  Speaker 2: People, five times more likely. It is the exact same
• 41:38
  Speaker 2: vulnerability profile isolation, trust and authority, lack of technical knowledge.
• 41:43
  Speaker 1: But the regulatory fight to protect them is actually getting
• 41:46
  Speaker 1: harder right now, not easier. Look at the recent Supreme
• 41:49
  Speaker 1: Court decision, the AMG Capital Management ruling.
• 41:52
  Speaker 2: This was a massive structural setback for consumer protection. For years,
• 41:57
  Speaker 2: the Federal Trade Commission the FTC used a specific mechanism,
• 42:00
  Speaker 2: a rule known as Section thirteen B to easily seize
• 42:04
  Speaker 2: money from scammers and funnel it directly back to the
• 42:06
  Speaker 2: victims as restitution.
• 42:08
  Speaker 1: They could use thirteen B even if the specific novel
• 42:11
  Speaker 1: scam fell outside the exact, outdated wording of the telemarketing
• 42:15
  Speaker 1: Sales rule. It was a flexible weapon against evolving fraud.
• 42:18
  Speaker 2: But the Supreme Court recently ruled that the FTC was
• 42:21
  Speaker 2: legally overstepping its congressionally mandated authority. The Court stripped the
• 42:26
  Speaker 2: FTC of its ability to easily obtain that equitable monetary
• 42:29
  Speaker 2: relief under Section thirteen B.
• 42:32
  Speaker 1: Which means the government is now crippled. They have to
• 42:34
  Speaker 1: go through a massive, glacially slow bureaucratic process to explicitly
• 42:38
  Speaker 1: amend the rules.
• 42:39
  Speaker 2: They literally have to rewrite the text of the TSR
• 42:42
  Speaker 2: to specifically cover inbound digital tech support scams, wait for
• 42:47
  Speaker 2: public comment and pass it just to have the legal
• 42:50
  Speaker 2: authority to seize the funds and get the victims their
• 42:53
  Speaker 2: money back.
• 42:54
  Speaker 1: It highlights the ultimate imbalance. The scammers move at the
• 42:58
  Speaker 1: speed of the Internet. They spin up a news scam
• 43:00
  Speaker 1: in an hour. The regulators are sourced to move at
• 43:03
  Speaker 1: the speed of the federal court system, which takes years.
• 43:06
  Speaker 2: So as we wrap up this massive investigation, synthesize this
• 43:10
  Speaker 2: grand theme for us, what is the ultimate takeaway from
• 43:14
  Speaker 2: all of this history.
• 43:15
  Speaker 1: If you look at the entire timeline we've discussed today,
• 43:18
  Speaker 1: the technology is in a state of constant, relentless rapid evolution.
• 43:22
  Speaker 1: We went from cash on delivery paper mailers pushed by
• 43:25
  Speaker 1: guys in sweaty rooms in nineteen eighty eight.
• 43:28
  Speaker 2: Then we moved to high pressure penny stock phone calls
• 43:30
  Speaker 2: back by fake financial data.
• 43:32
  Speaker 1: Then to automated nine hundred number billing systems exploiting utility monopolies,
• 43:37
  Speaker 1: and now to digital tech support pop ups hijacking our
• 43:40
  Speaker 1: web browsers. The delivery mechanism changes completely every decade.
• 43:44
  Speaker 2: But the underlying mechanics of the fraud, the core psychological
• 43:47
  Speaker 2: levers being pulled by the scammer, they never change.
• 43:50
  Speaker 1: It always boils down to three things. Urgency, authority, and
• 43:56
  Speaker 1: the exploitation of isolation.
• 43:58
  Speaker 2: Precisely, those are the huge bugs in the software. They
• 44:01
  Speaker 2: create a false sense of urgency, like the stock is
• 44:04
  Speaker 2: moving right now, or your computer's crashing right now, so
• 44:06
  Speaker 2: your brain enters fight or flight mode and you don't
• 44:09
  Speaker 2: have time to think critically.
• 44:10
  Speaker 1: They assume a false mantle of authority, a wealthy Wall
• 44:13
  Speaker 1: Street broker, a certified tech support agent, a government official,
• 44:18
  Speaker 1: so your natural inclination is to trust and comply.
• 44:21
  Speaker 2: And they target the isolated, the elderly living alone, the
• 44:24
  Speaker 2: desperate and economically depressed townspeople who do not have a
• 44:28
  Speaker 2: support network sitting next to them to say, hey, hang
• 44:30
  Speaker 2: up the phone, this is a scam.
• 44:32
  Speaker 1: Let's recap this incredible journey. We started in the cramped,
• 44:35
  Speaker 1: incredibly noisy desks of Broughton Hall in Santa Barbara, a
• 44:38
  Speaker 1: room full of cynical reps using fake accents to push
• 44:41
  Speaker 1: ten dollars booklets to the desperate.
• 44:43
  Speaker 2: We moved up to the slick corporate facades of the
• 44:46
  Speaker 2: Penny stock brokerages, where guys in suits weaponized outdated financial
• 44:51
  Speaker 2: data and complex margin mechanics to totally wipe out retirement accounts.
• 44:55
  Speaker 1: We dove into the digital underground, teenagers in dark alleys
• 44:59
  Speaker 1: dumpster diving for technical manuals to hack the global telephone network,
• 45:03
  Speaker 1: driven purely by curiosity and the thrill of the puzzle
• 45:06
  Speaker 1: rather than greed.
• 45:07
  Speaker 2: And we watched the birth of automated scaled fraud, where
• 45:11
  Speaker 2: scammers discovered a legal loophole to turn the respected local
• 45:14
  Speaker 2: phone company into their own collection agents, hiding behind the
• 45:17
  Speaker 2: protections of the First Amendment.
• 45:19
  Speaker 1: Right up to the high tech digital landscape of modern
• 45:22
  Speaker 1: tech support pop ups. The lesson is clear. Behind every
• 45:26
  Speaker 1: single piece of new communication technology, from the dial up
• 45:30
  Speaker 1: modem to the smartphone. There is an entire shadow economy
• 45:33
  Speaker 1: figuring out exactly how to weaponize it against us.
• 45:36
  Speaker 2: Every new tool of connection is simultaneously a new weapon
• 45:39
  Speaker 2: of exploitation. It is a very sobering reality to confront
• 45:43
  Speaker 2: it is, and.
• 45:44
  Speaker 1: I want to leave you with one final original thought
• 45:46
  Speaker 1: to mull over something that builds on everything we've unpacked today,
• 45:50
  Speaker 1: but lists to the future. Right now, society is deeply
• 45:53
  Speaker 1: gripped by anxiety about what is coming next.
• 45:56
  Speaker 2: We spend so much time worrying about artificial intelligence. We
• 46:00
  Speaker 2: worry about deep fakes tricking us with perfect video manipulation.
• 46:04
  Speaker 1: We worry about incredibly complex, opaque algorithms hacking our reality.
• 46:10
  Speaker 1: But the history of the nineteen eighties boiler Room proves
• 46:13
  Speaker 1: something much simpler and much more chilling.
• 46:15
  Speaker 2: You do not need a highly advanced futuristic technology to
• 46:19
  Speaker 2: hack a human being.
• 46:20
  Speaker 1: All you need is a telephone, a well written script
• 46:23
  Speaker 1: that pushes the right emotional buttons, and someone on the
• 46:26
  Speaker 1: other end of the line who is isolated, vulnerable, and
• 46:28
  Speaker 1: just wants to hear a friendly voice.
• 46:29
  Speaker 2: It is the human element itself that is the ultimate
• 46:32
  Speaker 2: unpatchable vulnerability.
• 46:34
  Speaker 1: That's our show for today. Remember if you found this
• 46:36
  Speaker 1: exploration valuable, please take a moment to rate Beyond Infographics
• 46:39
  Speaker 1: five stars. It is the absolute best way to support
• 46:42
  Speaker 1: the deep investigative work we do here.
• 46:44
  Speaker 2: We really appreciate it until the next time we pull
• 46:47
  Speaker 2: back the curtains. Stay curious out there. Then had to
• 47:05
  Speaker 2: Rebilliam