‘Deely Nuts,’ ‘Beefy King,’ and other fake businesses reportedly got $7 million in COVID-19 PPP loans through one lender

biden burgers
President Joe Biden.

  • Fake firms collected $7 million in COVID-19 small business relief through online lender Kabbage, ProPublica found.
  • Most fake businesses were registered as farms, with names including “Deely Nuts” and “Beefy King.”
  • Kabbage processed 378 loans to fraudulent companies via the Paycheck Protection Program, ProPublica reported.
  • See more stories on Insider’s business page.

Fake businesses received a collective $7 million in federal COVID-19 relief loans last year through online lending platform Kabbage, and most were registered as farms, according to an investigation by ProPublica.

Kabbage processed 378 loans to bogus businesses under the Paycheck Protection Program (PPP) in the scheme’s first round of funding from March to August last year, the investigation found. Non-existent farms claiming to be based in New Jersey, such as “Ritter Wheat Club” and “Deely Nuts,” each received $20,833, the maximum loan available to sole proprietorships, ProPublica reported.

The Coronavirus Aid, Relief, and Economic Security Act (CARES), passed in March 2020, funded the PPP scheme, and was intended to to help struggling businesses keep employees on their payroll and stay afloat during the pandemic.

The investigation also found that “Beefy King,” a fake cattle ranch registered in New Jersey, filed for a $20,567 loan. The money was registered to the address of Joe Mancini, mayor of Long Beach Township, who denied any knowledge of the application.

“There’s no farming here: We’re a sandbar, for Christ’s sake,” Mancini told ProPublica on the phone.

ProPublica checked New Jersey business records for the farms and found that none of them existed. Hundreds of PPP applicants across 28 states didn’t show up in state registration records, and other lenders had nonexistent businesses on their books too, not just Kabbage, ProPublica reported.

The story is part of a wider problem: The Small Business Administration, which connects business owners to lenders, estimated in January that it approved loans for 55,000 potentially ineligible businesses, and that 43,000 received more money than needed for their payrolls.

ProPublica started investigating the loans after a New Jersey resident got in contact, saying his name was attached to a Kabbage loan linked to a “melon farm.”

The lender, which American Express acquired in August last year, processed nearly 300,000 loans in the first round of PPP funding, according to ProPublica.

“At any point in the loan process, if fraudulent activity was suspected or confirmed, it was reported to FinCEN, the SBA’s Office of the Inspector General and other federal investigators, with Kabbage providing its full cooperation,” Kabbage spokesman Paul Bernardini told ProPublica in an emailed statement.

Kabbage did not immediately respond to Insider’s request for comment.

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Cryptocurrency fraud is rampant. Here’s how to protect yourself as a crypto investor.

The photo shows physical imitations of cryptocurrency
The photo shows physical imitations of cryptocurrency

  • A new FTC report says that cryptocurrency fraud is the most costly type of fraud for Americans in their 20s and 30s.
  • There are ways to protect yourself, from not participating in fake giveaways to researching.
  • See more stories on Insider’s business page.

The Federal Trade Commission released a report on Monday warning that cryptocurrency fraud and scams are on the rise as more investors put their money into the blockchain.

The FTC also released guidance on how to protect yourself, as the relative novelty of cryptocurrency investments means that people might not even know they’re being taken advantage of.

Consumers are advised to keep an eye out for deals or returns that look too good to be true in the crypto space, just as with other online scams.

However, there are also cryptocurrency-specific tips that the FTC put out.

Investors are warned to avoid scammers impersonating celebrities, “doing giveaways with claims of multiplying any cryptocurrency you send.” The FTC specified that losses from crypto scams that impersonated Elon Musk totaled more than $2 million in just the last six months.

One man in Germany told the BBC that he invested over $500,000 in a giveaway scam that impersonated Musk.

The report also warned cryptocurrency owners to avoid trading coins on dating apps, and urged people to vet their investments by searching for the company’s name in conjunction with keywords like “scam” or “review.”

The FTC warns that users cannot get their money back in many cases after sending cryptocurrency, wire transfers, or gift cards to scammers.

Younger people are particularly likely to be affected by cryptocurrency scams, the FTC notes.

“Consumers age 20 to 49 were over five times more likely than older age groups to report losing money to a cryptocurrency investment scam,” the report stated. And cryptocurrency scams lost people in their 20s and 30s more money than any other type of fraud.

The FTC’s spotlight covers the pasts six months and aggregates 7,000 reports of fraud.

If you think you’ve experienced a cryptocurrency scam, you can report it to the FTC here.

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Deputy campaign manager for former Sen. Martha McSally stole over $115,000 from her campaign

Re. Martha McSally
Re. Martha McSally

  • A former deputy campaign manager stole over $115,000 from former Sen. Martha McSally’s campaign.
  • Anthony Barry, who worked on McSally’s 2018 campaign, is facing up to five years in prison.
  • McSally lost her 2018 senate bid to now-Sen. Kyrsten Sinema in a close race.
  • See more stories on Insider’s business page.

The former deputy campaign manager to former Sen. Martha McSally pleaded guilty to stealing campaign funds, the Justice Department announced on Friday.

Anthony Barry stole more than $115,000 from McSally’s campaign in 2018 and 2019, the department said. He’s facing up to five years in prison with a sentencing hearing scheduled for July 6.

Barry, who served as a deputy campaign manager and consultant for McSally, was accused of using his position to “fraudulently” directing the campaign to give him additional payments beyond his salary.

McSally lost her 2018 Senate bid to now-Sen. Kyrsten Sinema in a close race. She was appointed to fill the seat of the late Sen. John McCain in December 2018 and ran for re-election in 2020 but lost to now-Sen. Mark Kelly.

Dylan Lefler, McSally’s campaign manager during her 2020 senate bid, told the Arizona Republic that the campaign learned that Barry was taking money without authorization two years ago, ended his contract, and contacted authorities.

“Martha McSally appreciates the FBI’s efforts to resolve this case,” Lefler said.

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A man was arrested after allegedly spending $5 million in stolen COVID-19 relief on Ferrari, Bentley, and Lamborghini sports cars

A black lamborghini sports car with the door open
A black Lamborghini, one of the cars federal agents seized from the suspect.

  • A man was arrested Friday on charges related to fraudulently obtaining and spending $5 million in PPP loans.
  • Officials said the man gave banks falsified documents to apply for loans for four “sham businesses.”
  • They said he spent some of the money on Ferrari, Bentley, and Lamborghini sports cars, which were seized by federal agents.
  • See more stories on Insider’s business page.

A man from Irvine, California, was arrested on Friday over charges that include illegally obtaining $5 million in COVID-19 relief and spending it on sports cars, according to the Department of Justice.

Mustafa Qadiri, 38, is accused of fraudulently receiving money through the Payment Protection Program by applying for the loan under the guise of “sham businesses.” His charges include bank fraud, wire fraud, aggravated identity theft, and money laundering.

According to the indictment, Qadiri applied for the PPP loans in May and June of 2020. He submitted falsified documents to three different banks, claiming to operate four businesses in Orange County, none of which are currently in operation. He provided the banks with false employee records, tampered bank account balances, and fake tax returns.

Read more: Fraudulent unemployment claims have cost the US tens of billions of dollars since the pandemic began. Congress and the Biden administration need to crack down on this abuse.

For one of the loans, the Justice Department said he used another person’s name and social security number.

His loan applications were approved and the banks transferred about $5 million into his accounts, the indictment said.

The Justice Department said he allegedly used the “fraudulently obtained” loans “for his own personal benefit, including for expenses prohibited under the requirements of the PPP program, such as the purchase of luxury vehicles, lavish vacations, and the payment of his personal expenses.”

Ferrari, Bentley, and Lamborghini sports cars that Qadiri allegedly bought with the loans were seized by federal agents.

PPP loans were implemented as a coronavirus relief measure and were intended to encourage small businesses to keep their employees on payroll during the economic fallout of the pandemic. The loans did not have to be paid back as long as they met certain spending criteria.

“Businesses must use PPP loan proceeds for payroll costs, interest on mortgages, rent, and utilities,” the Justice Department said.

Charges have been brought against multiple people related to fraudulently obtaining PPP loans.

In a similar case, the Justice Department said Friday a man from Connecticut was arrested over charges that allege he fraudulently obtained $2.9 million in PPP loans and spent them on expensive cars, including to pay off a Porsche Panamera Turbo and to purchase both a Mercedes and BMW.

“Congress authorized the Paycheck Protection Program to help small businesses and their employees withstand a devastating pandemic, not so individual recipients can illegally reap a financial windfall,” Acting U.S. Attorney Leonard C Boyle said.

Have a news tip? Contact this reporter at kvlamis@insider.com.

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Former Netflix executive convicted of fraud after orchestrating more than $500,000 in bribes and kickbacks

netflix
  • Ex-Netflix IT chief Michael Kail on Friday was convicted of 28 counts of fraud and money laundering.
  • Kail created a “pay-to-play” scheme, taking bribes and kickbacks from tech startups hoping to do business with Netflix.
  • Kail, who was indicted in 2018, must also forfeit a Los Gatos home he purchased with the funds.
  • See more stories on Insider’s business page.

Former Netflix vice president of IT Michael Kail was convicted by a federal jury on Friday of 28 counts of fraud and money laundering, the US Department of Justice announced in a press release.

Kail, who was indicted in 2018, used his position to create a “pay-to-play” scheme where he approved contracts with outside tech companies looking to do business with Netflix in exchange for taking bribes and kickbacks, according to evidence presented to the jury, the release said.

Kail accepted bribes or kickbacks from nine different companies totaling more than $500,000 as well as stock options, according to the DOJ’s press release.

The jury also ordered Kail to forfeit to the government a home he purchased in Los Gatos, California, using the funds he obtained through the illegal scheme.

“Bribery undermines fair competition and innovation in any business arena, and particularly Silicon Valley’s highly competitive environment of cutting-edge innovation,” acting US Attorney Stephanie Hinds said in a press release.

“As Netflix’s Vice President of IT Operations, Michael Kail wielded immense power to approve valuable Netflix contracts with small tech vendors, and he rigged that process to unlock a stream of cash and stock kickbacks to himself. Netflix and other companies expect and deserve honest services from its employees.”

Netflix sued Kail after he left the company in 2014 to take a role as Yahoo’s CIO, accusing him of fraud and breaching his fiduciary duties. Netflix declined to comment.

According to the DOJ, Kail faces a maximum sentence of up to 20 years in prison and a fine – either $250,000, twice the gross amount he pocketed as part of the scheme, or twice the amount of Netflix’s loss, whichever is greatest – for each wire or mail fraud conviction, as well as up to 10 years in prison and a $250,000 fine for each money laundering conviction.

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Facebook and Google are failing to crack down on scam ads, new research suggests

Facebook Logo
More than a quarter of people that reported a scam ad to Google said it was not taken down.

  • Facebook and Google are failing to clamp down on reports of fraudulent ads, new research shows.
  • Consumer group Which? called for new laws to force the tech giants to monitor fraud more closely.
  • Both firms said scam ads were not allowed on their platforms and would take action where necessary.
  • See more stories on Insider’s business page.

Facebook and Google are failing to crack down on fraudulent ads placed on their platforms, even after users have reported them, new research shows.

Online fraud has skyrocketed over the past year, as scammers capitalized on the widespread lockdowns that have kept people indoors all over the world.

Tech giants have come under pressure to take action against nefarious actors with past reports accusing Facebook of having a “lax approach” to the issue, while criminals continue to set up fake Google ads in a matter of hours.

More than a third (34%) of people that reported a scam ad to Google said it was not taken down while just over a quarter (26%) said the same had happened with Facebook, according to a study published by British consumer group Which?.

Which gave examples of scammers posting fake ads for discounts at established shoe retailers like Clarks or Russell and Bromley, using their logos and branding. These ads lead to look-a-like websites that steal consumers’ financial details. One victim said she paid £85 for a pair of boots, but instead received a pair of cheap sunglasses.

Which? scam ad
Scammers post convincing fake ads for brands, such as shoe retailer Clarks.

The study, of 2,000 adults in the UK, found that while Google was worse at reacting to reported scams, victims were more likely to encounter a fraudulent ad on Facebook in the first place.

Around 27% said they had come up against a scam ad on Facebook compared to 19% on Google.

Adam French, a consumer rights expert at Which?, said the findings showed both Facebook and Google had left their users “worryingly exposed to scams,” and suggested the UK government bring in legislation to root out the problem.

“Online platforms must be given a legal responsibility to identify, remove and prevent fake and fraudulent content on their sites,” he said. “The case for including scams in the Online Safety Bill is overwhelming and the government needs to act now.”

As part of the British government’s proposed Online Safety Bill, tech companies that allow users to post their own material or talk to others online could be fined up to £18 million (around $25 million) or 10% of their annual revenue, whichever is higher, for failing to remove “harmful” content.

The Bill is expected to contain extra provisions for the biggest social media companies with “high-risk features,” expected to include Facebook, TikTok, Instagram and Twitter.

A Facebook spokesperson told Insider fraudulent activity was “not allowed” on its platform, adding that the company had taken action against a number of the scam pages reported.

“Our 35,000 strong team of safety and security experts work alongside sophisticated AI to proactively identify and remove this content, and we urge people to report any suspicious activity to us,” they said.

A Google spokesperson said the company had previously removed more than 3.1 billion scam ads for violating its policies. “We take action on potentially bad ads reported to us and these complaints are always manually reviewed,” they said.

Insider previously uncovered scammers promising investors “huge returns” in a phony cryptocurrency scheme, while using fake quotes from Elon Musk and Daniel Craig while advertising on YouTube.

Are you a current or former Googler with more to share? You can contact this reporter securely using the encrypted messaging app Signal (+447801985586) or email (mcoulter@businessinsider.com). Reach out using a non-work device.

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Scammers stole the driver’s license numbers of some Geico customers in a data breach, and they could be used to file for fraudulent unemployment benefits

Geico gecko

If you’re a Geico customer, check your mail and inbox.

Some Geico customers were notified in April that their personal information – specifically their drivers license number – had been compromised in a data breach caused by a security bug on the insurer’s website, TechCrunch’s Zack Whittaker first reported.

Geico directly notified some customers on April 9 that “fraudsters used information about you – which they acquired elsewhere – to obtain unauthorized access to your driver’s license number through the online sales system on [Geico’s] website.”

The breach, Geico said, occurred between January 21 and March 1 of this year. Geico said it has since secured its website from the vulnerability.

The insurer warned that fraudsters would likely use the license numbers to fraudulently apply for unemployment benefits, which often require a state ID.

A Geico spokesperson did not immediately respond to a request for comment on the number of customers affected and whether the data had been tied to confirmed cases of unemployment fraud.

In the notice sent to customers who were affected, Geico urged vigilance and offered a one-year subscription to IdentifyForce, an “identity-theft protection service.” Geico said in the notice that it did not know for certain whether the customer’s drivers license number had been fraudulently used, but that it was a possibility.

Unemployment fraud has spiked as unemployment claims increased during the pandemic, an AP report in February found. By November of last year, the US Department of Labor’s Office of Inspector General estimated that states paid out up to $36 billion in “improper benefits,” with much of the impropriety attributed to fraud, according to the report.

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Bernie Madoff, Wall Street financier and Ponzi scheme organizer, has died at age 82

Bernie Madoff
Bernie Madoff arrives at Manhattan Federal court on March 12, 2009 in New York City.

Bernie Madoff, the Wall Street financier-turned-Ponzi scheme kingpin, has died, the Associated Press reported Wednesday.

He was 82. Madoff apparently died of natural causes in federal prison, according to an AP source. He is survived by his wife, Ruth Madoff.

Born in New York City in 1938, Madoff founded a stock brokerage in 1960 that eventually became Bernard L. Madoff Investment Securities. The firm specialized in over-the-counter penny stocks, using pink sheet quotes to make markets for traders. Madoff’s brokerage then moved on to computerized trades, employing information technology to organize quotes. The digital market-making service went on to underpin the NASDAQ exchange.

The brokerage bypassed traditional exchange firms to allow traders to directly order from retail brokers, and at one point served as the largest market maker at the NASDAQ. Madoff served as a NASDAQ director for three single-year terms.

The financier developed close friendships with major players in the financial sector and used his network to spark what became the largest case of financial fraud in US history. Madoff signed on numerous wealthy friends as investors in his firm offered hefty compensation, and garnered recommendations on other investors to fold into the venture. He also warmed up to financial industry regulators, building up the brokerage as a prestigious and respected firm in the lucrative sector. Wealthier and wealthier financiers were drawn into the business seeking the prestige that emanated from Madoff’s firm.

The garnering of new capital kicked off Madoff’s Ponzi scheme. New investments would pay off those having already joined, and new clients were encouraged to attract more investors. The scheme granted major profits to those who joined the firm early and eventually drove billions of dollars in losses for the majority of clients who worked with Madoff’s business later on.

No major Wall Street firms invested with Madoff, as they suspected his operations were not legitimate. Others pointed to Madoff’s three-person team as proof that the firm couldn’t pull in the massive gains they posted.

Investigators estimated that Madoff’s scheme began in the early 1980s. The Securities and Exchange Commission conducted several investigations into the business but failed to find any evidence of malpractice. The Central Bank of Ireland missed any warning signs when Madoff’s multibillion-dollar fraud began using Irish funds to pad returns.

Madoff was arrested in New York in December 2008 after a whistleblower – who was later identified as one of his sons – said the financier was failing to pay off $7 billion to his clients. Many of Madoff’s business partners looked to pull their funds from the business in December as the global financial crisis prompted mass fear around the financial industry’s validity. Madoff sought to pay out $173 million in bonuses to his closest partners, but when his sons caught wind of the rewards and confronted their father, he admitted that the entire firm was “just one big lie” and “basically, a giant Ponzi scheme.”

Madoff’s sons reported their father to federal authorities, and the disgraced financier was arrested and charged with securities fraud on December 11, 2008. He pleaded guilty to 11 federal felonies on March 12, 2009, including securities fraud, wire fraud, money laundering, and perjury.

District Court Judge Denny Chin sentenced Madoff to 150 years in federal prison on June 29, 2009. Madoff’s lawyers asked the judge to shorten the sentence to 7, and later 12, years due to his limited life expectancy, but Chin ruled the sentence was appropriate, calling Madoff’s crimes “extraordinarily evil.”

Madoff requested compassionate release from prison last year, telling a judge he had only 18 months to live due to end-stage kidney disease and other “chronic, serious medical conditions.”

A judge denied his request in June 2020.

The size of Madoff’s fraud varies from estimate to estimate. Early investigators pegged the fraud’s total value at $65 billion, while trustees of assets seized Irving Pickard estimated the amount owed to victims was roughly $57 billion. Former SEC chair Harvey Pitt noted the fraud likely involved between $10 billion and $17 billion.

Pickard was tasked with recovering funds lost in the scheme and returning them to investors. He and his team have already recovered more than $13 billion in lost funds, roughly three-quarters of approved claims, by suing those who profited from Madoff’s scheme.

The US government announced in November 2017 it would begin paying out $772.5 million to more than 24,000 victims of Madoff’s scheme.

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The cofounders of bankrupt poop-testing startup uBiome have been charged with fraud

ubiome thumb 4_3 (1)
UBiome founders and former co-CEOs Zachary Apte and Jessica Richman.

  • The SEC has charged uBiome cofounders Jessica Richman and Zachary Apte with fraud.
  • Richman and Apte also face criminal charges related to the poop-testing startup uBiome.
  • uBiome was a microbiome-testing startup that shut down in 2019 after an FBI raid.
  • See more stories on Insider’s business page.

Jessica Richman and Zachary Apte, the cofounders of the now shuttered microbiome company uBiome, are facing criminal and civil charges stemming from their efforts to build uBiome into a poop-testing powerhouse.

The Securities and Exchange Commission alleged that Richman and Apte defrauded investors out of $60 million by giving a false impression of how well the company was doing. The married cofounders are also facing criminal charges in federal court in California. They were indicted on Thursday on charges including healthcare fraud and wire fraud, as well as related conspiracy charges.

The SEC complaint alleged Richman, 46, and Apte, 36, portrayed uBiome as receiving health-insurance reimbursements for its tests, which tested poop samples for different conditions related to gut health. The complaint alleged the cofounders made millions as uBiome raised money from investors.

“We allege that Richman and Apte touted uBiome as a successful and fast-growing biotech pioneer while hiding the fact that the company’s purported success depended on deceit,” Erin Schneider, the director of the SEC’s San Francisco regional office, said in a statement.

uBiome is the latest Silicon Valley biotech to be accused of tricking investors. The now shuttered blood-testing company Theranos in 2018 settled with the SEC over allegations of “massive fraud.” Theranos founder Elizabeth Holmes was charged with fraud and is expected to appear in court this summer.

uBiome Toilet Paper 1
The microbiome-testing company uBiome came under scrutiny after an FBI raid.

uBiome morphed from science project to venture-backed startup

uBiome was founded in 2012 on the promise of helping ordinary people understand the bacteria living in and on them, known as their microbiome.

The company morphed from citizen science project to venture-backed startup, taking in $105 million from investors and reaching a valuation of $600 million.

Then the troubles began. The FBI raided the company in April 2019. By the end of June that year, the company’s top leadership and many of its board members had departed. In October 2019, the company said it was shutting down in a Chapter 7 bankruptcy filing.

The complaints paint a detailed picture of how uBiome got health-insurance companies to cover its tests using what prosecutors say was deception.

The SEC complaint alleged the uBiome founders duped doctors into ordering tests. uBiome built out a portal that connected patients with doctors who could order the test. The complaint alleged the network of doctors was designed to get doctors to order the two medical tests uBiome offered and prescribe based only on an online question form.

How uBiome got health insurers to pay for its tests

The civil complaint also alleged the company fooled doctors into retesting old samples. The criminal complaint alleged that uBiome worked to “re-sequence” existing samples by telling consumers that there had been newer versions of uBiome’s test. By doing so, the complaint alleged, uBiome could increase the number of billable claims, all while using an existing sample.

By using this network of doctors, uBiome was often able to get reimbursements from insurers.

The criminal complaint alleged uBiome tricked insurers into paying for tests that weren’t medically necessary or properly vetted by medical regulators. In some cases, the company faked documents by using the names of doctors and other healthcare workers without their knowledge, prosecutors said.

But the insurers were catching on to uBiome.

According to the SEC complaint, at least 18 insurers had sent the company letters about its billing practices by April 2019. The criminal complaint alleged that Apte and Richman didn’t tell investors about the questions insurers were asking.

What’s more, the complaint alleged that Apte and Richman “had to falsify documents and lie to insurance providers in order to attempt to keep them at bay.”

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Former Theranos CEO Elizabeth Holmes is pregnant, and is requesting her federal trial to be delayed again

elizabeth holmes
Elizabeth Holmes, founder of Theranos.

  • Theranos founder and former CEO Elizabeth Holmes is pregnant, her lawyer says.
  • Holmes expects to give birth in July, and is asking to push her trial back to the end of August.
  • The federal prosecution also requested a delay due to her pregnancy.
  • Visit the Business section of Insider for more stories.

Founder and former Theranos CEO Elizabeth Holmes is pregnant, according to new court documents.

Holmes expects to give birth in July, and is requesting a delay to her federal trial, according to newly filed court documents. Both Holmes’ lawyers and the prosecution requested the trial’s delay. If approved, she’ll face trial for multiple federal charges of fraud starting on August 31.

Holmes, who was the focus of an HBO documentary about Theranos, is alleged to have defrauded the company’s investors out of millions of dollars with the promise of a new type of blood test. That test was purported to perform a multitude of blood tests, able to detect everything from high cholesterol to cancer, with a simple pin prick.

The company raised over $700 million from investors on the promise of such a test. By August 2015, the FDA began investigating Theranos and found “major inaccuracies” in its tests.

Holmes, alongside former Theranos president Sunny Balwani, was charged with nine counts of wire fraud and two counts of conspiracy to commit wire fraud by the US Department of Justice in 2018. She subsequently stepped down from her role as CEO.

If convicted, Holmes is facing upwards of 20 years in federal prison.

Got a tip? Contact Insider senior correspondent Ben Gilbert via email (bgilbert@insider.com), or Twitter DM (@realbengilbert). We can keep sources anonymous. Use a non-work device to reach out. PR pitches by email only, please.

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