The lack of transparency in our public pensions makes fraud easier than crypto fraud.
The lack of transparency in our public pensions makes fraud easier than cryptocurrency fraud.
Which is the bigger scam, public pension funds or cryptocurrencies? The surprising answer is pension funds and their The reasons, she says, all have to do with transparency..
Long rumored to provide post-retirement security to American workers, the pension plan guarantees continued income after retirement if employees contribute a portion of their current earnings to the plan. You seem to promise your employees thataccording to public planning dataAccording to the 2020 Census, there are nearly 6,000 public sector retirement plans that collectively hold $4.5 trillion in assets and distribute $323 billion annually for 25.9 million civil servants and retirees. increase. This is a huge pot of money notorious for attracting the wolves of Wall Street, a fund that exploits regulatory gaps and weaknesses in institutional controls to enrich itself at the expense of pensioners. This includes managers and financial advisors.
Public pensions, unlike corporate plans, are not subject to ERISA, the federal law that protects pensions, or other equivalent comprehensive state regulatory regimes. As a result, Wall Street views public pensions as “the stupidest investors in the room” and reserves the most outrageous practices for these minions.
according to 2016 study by Pew Charitable Trusts, state retirement plans receive limited guidance and standards on plan administration and fee disclosure from the Government Accounting Standards Board and the Association of Government Finance Officials Best Practices for Employee Retirement Plan Investments. State and local pensions have different interpretations of these rules, with some open to greater transparency in plans and others interested in protecting Wall Street from public scrutiny over fees and corrupt industry practices. Some people seem to havethe size of the problem Illustration by PEW It shows that public pension fund allocations to alternative investments (hedging, private equity, real estate funds, etc.) doubled from 11% in 2006 to 25% in 2013 (as I point out in my book). as is Who stole my pension?, all public pensions I surveyed significantly underreport their holdings of alternative investments. The true average allocation to alt is probably closer to 40% or more. )
This radical shift away from exchange-traded investments is very worrying. High risk and high cost. These investment products provide loopholes that Wall Street fund managers use to demand confidentiality and water down state archive laws. Alternative fund managers claim the excessive and deceptive fees they charge are “trade secrets” exempt from disclosure to pension officials.
“Think of these private investments like Russian nested tea dolls,” says Santos. “A pension plan pays to invest in a fund, and that fund pays to invest in another fund that consists of several high-risk financial instruments, each of which is poorly disclosed. , or may charge hidden additional fees.”
The latest research published by Boston University Center for Retirement Studies This August, even if meaningful regulatory guardrails were put in place since Pew’s survey, they were less important as fiscal 2022 returned to “…record investment losses and rising pension spending…” is confirming. In recent headlines, reason foundation “Unfunded public pension debt is projected to rise to $1.3 trillion in 2022,” it warned. Class action lawsuits are on the rise.according to Human Resource Management SocietySince 2020, more than 200 new class action lawsuits have been filed under ERISA, with another 100 for breach of fiduciary duty over fees charged to plan participants, and more are expected. I’m here. Unfortunately, it is almost impossible to bring class action lawsuits alleging public pension mismanagement under state law (because ERISA does not apply).
There are many underlying causes of poor management of pension funds, but in most cases lack of transparency is at the root of the problem. Sunshine is and still is the best sanitizer ever. If the pension scheme and all of its investments were completely transparent and open to the public, it would be much more difficult to hide fraud.
Santos said that in contrast to public pensions, Bitcoin, the world’s first cryptocurrency, runs on a completely transparent platform called “blockchain,” which is proven to be resistant to fraud and hacking. I’m here. on purpose“I hope you can creep the weeds of blockchain technology with me for a little while,” she says.
Simply put, blockchain is a new way to keep track of details and solves many of the problems we have with current data management systems, especially around data privacy and security, she says. Blockchain is basically a decentralized network that stores digital information in blocks. Each block of new information is timestamped, numbered sequentially, and added to the previous block to form a chain. Anyone, from anywhere, can participate in maintaining the blockchain network by running a copy of the software on their computer. These computers, called “network nodes,” each replicate the entire transaction history of the blockchain. Each transaction is verified and confirmed by at least 51% of network nodes before being encrypted and written to the blockchain. Once recorded, the software does not allow editing, leaving a perfect trail for auditors. According to Santos, blockchain has proven impenetrable by malicious actors who have achieved “decentralization” of the network. This means that no one or organization can control its functionality.
Although there is some debate about what decentralization means, there is consensus that both Bitcoin and Ethereum blockchains have achieved decentralization. This is why Canadian Prime Minister Justin Trudeau was unable to stop sending Bitcoin to Canadians during truckers’ protests. The Bitcoin blockchain is so huge, spanning the breadth and depth of the earth, that it would have to cut off the global internet forever.
“All transactions ever performed on publicly available blockchains like Bitcoin and Ethereum have always been completely transparent to public inspection. You can track that activity up-chain, down-chain and cross-chain.Let’s do it with cash!”
Imagine all government transactions recorded on a decentralized, immutable, publishable blockchain, says Santos. Being the ultimate truth-telling machine, there are no more Mystery Line items or black budgets.
Santos believes that the cryptocurrency scams we hear about a lot are usually not about this core technology, but about cheap imitations and derivatives. They are counterfeits offered by wolves in sheep’s clothing that prey on hopeful and ignorant people, pensioners alike, financial advisors marching as regulated fund managers and trustees was defrauded by
When I asked her how investors could tell the difference, she said it wasn’t easy and needed a separate article on the details. In the meantime, Mr. Santos, please consider the following. If there is a perfect solution to corruption, why isn’t it implemented? Why are you guessing? Someone or someone is profiting from maintaining the status quo. Who? follow the money ”
I’m not a cryptocurrency transparency expert, but I do know about public pensions. And based on 40 years of forensic experience, I can affirm that the quickest way to end public pension fraud is to restore the full transparency once required by state public records laws.
