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Chinese-Made Smartphones Are Secretly Stealing Money From People Around The World

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When Mxolosi saw a Tecno W2 smartphone in a store in Johannesburg, South Africa, he was attracted to its looks and functionality. But what really drew him in was the price, roughly $30 — far less than comparable models from Samsung, Nokia, or Huawei, Africa’s other top brands.

“They’re very attractive and appealing to your eyes,” Mxolosi, who asked for his last name not to be used to protect his personal safety, told BuzzFeed News. “Honestly, I was a Samsung fan but I said, ‘Let me try this new product.’”

It was another sale for Transsion, the Chinese company that makes Tecno and other low-priced smartphones, as well as basic handsets, for the developing world. Since releasing its first smartphone in 2014, the upstart has grown to become Africa’s top handset seller, beating out longtime market leaders Samsung and Nokia.

But its success can come at a price. Mxolosi, an unemployed 41-year-old, became frustrated with his Tecno W2. Pop-up ads interrupted his calls and chats. He’d wake up to find his prepaid data mysteriously used up and messages about paid subscriptions to apps he’d never asked for.

“It was expensive for me, and at some point I ended up not buying data because I didn’t know what was eating it up,” he said.

He thought it might be his fault, but according to an investigation by Secure-D, a mobile security service, and BuzzFeed News, software embedded in his phone right out of the box was draining his data while trying to steal his money. Mxolosi’s Tecno W2 was infected with xHelper and Triada, malware that secretly downloaded apps and attempted to subscribe him to paid services without his knowledge.

Secure-D’s system, which mobile carriers use to protect their networks and customers against fraudulent transactions, blocked 844,000 transactions connected to preinstalled malware on Transsion phones between March and December 2019.

Secure-D Managing Director Geoffrey Cleaves told BuzzFeed News that Mxolosi’s data was used up by the malware as it attempted to subscribe him to paid services. “Imagine how quickly his data would disappear if the subscriptions were successful,” he said.

Along with South Africa, Tecno W2 phones in Ethiopia, Cameroon, Egypt, Ghana, Indonesia, and Myanmar were infected.

“Transsion traffic accounts for 4% of the users we see in Africa. Yet it contributes over 18% of all the suspicious clicks,” Secure-D Managing Director Geoffrey Cleaves told BuzzFeed News.

It’s the latest example of how cheap Chinese smartphones take advantage of the world’s poorest people. Current security concerns about Chinese apps and hardware have largely focused on potential back doors in Huawei’s 5G equipment. More recently, people have focused on how user data collected by TikTok could be abused by the company and the Chinese government. But an overlooked and ongoing threat is the consistent presence of malware on cheap smartphones from Chinese manufacturers and how it exacts a digital tax on people with low incomes.

A Transsion spokesperson told BuzzFeed News that some of the company’s Tecno W2 phones contained the hidden Triada and xHelper programs, blaming an unidentified “vendor in the supply chain process.”

“We have always attached great importance to consumers’ data security and product safety,” they said. “Every single software installed on each device runs through a series of rigorous security checks, such as our own security scan platform, Google Play Protect, GMS BTS, and VirusTotal test.”

The spokesperson said Transsion did not profit from the malware, and they declined to say how many handsets were infected.

Michael Kwet, a visiting fellow of the Information Society Project at Yale Law School who received his doctorate in South Africa, called the idea of Chinese-made phones extracting data and money from people living in poverty “digital colonialism.”

“If you have no disposable income, you’re basically left with people preying on your data,” he told BuzzFed News. “The problem we have here is that we don’t have a rational business model for a digital society.”

Though it’s largely unknown outside of Africa and in developing countries, Transsion is the fourth-biggest handset maker in the world, behind Apple, Samsung, and Huawei, but it’s the only manufacturer in that group to exclusively focus on low-income markets.

The need to keep costs low opens the door to malware and other vulnerabilities, according to Cleaves. “A fraudster is able to take advantage of that desire for a low price by offering their [hardware or software] services, even at loss, knowing that they can recover the costs through this ad fraud,” he said.

Secure-D previously discovered preinstalled malware on Alcatel phones made by TCL Communication, a Chinese handset maker, in Brazil, Malaysia, and Nigeria. It also exposed how Chinese technology preinstalled on cheap smartphones in Brazil and Myanmar robbed users with fraudulent transactions.

“In many cases it’s [a consumer’s] first smartphone and the first time these people have access to the internet,” Guy Krief, a board member of Upstream Systems, the UK company that operates Secure-D, told BuzzFeed News. “The data eaten up by the malware — that’s a very important part of their income.”

Kenneth Adu-Amanfoh, the executive director of the Africa Cybersecurity and Digital Rights Organization, said Chinese phones with preinstalled malware have become a major threat on the continent.

“You have all these wonderful features for cheap, but there is a hidden cost,” he told BuzzFeed News. “There are a lot of Chinese phones that have malware installed on it.”

“At some point I ended up not buying data because I didn’t know what was eating it up,” said Mxolosi, who had to shut down a café he was running due to the coronavirus. South Africa has the fifth-highest number of cases of COVID-19 in the world, according to Johns Hopkins University.

Learning that his smartphone had been stealing his money felt like yet another hardship. “Poor people are getting even more poor. People are going hungry,” he said.

People in the United States are also being exploited. Earlier this year, Malwarebytes, a security service, found preinstalled malware of Chinese origin in two phones offered to citizens with low incomes as part of the US government’s Lifeline program, which provides subsidized phones and mobile data. Both phones were made by Chinese companies.

Nathan Collier, a senior mobile malware analyst at Malwarebytes, said cheap Chinese smartphones are a security risk to people with low incomes around the world.

“It seems like we’re seeing the same story over and over again where there’s a cheap phone made from China with Chinese malware on it that gets in the hands of people who can’t afford a pricier phone,” he told BuzzFeed News. “Having preinstalled malware right there in your phone when you turn it on out of the box is gross and nasty.”

Collier researched Triada and xHelper and said they were “the first malware [he’s] even seen where a factory reset doesn’t take care of it. That’s a game changer.”

Typically, malware like Triada and xHelper requires someone to be tricked into installing it on their phones, rather than it coming straight from the factory. It’s often used to deliver invasive ads that send money back to whoever controls the malware. But it can also be used to install apps that subscribe the victim to paid services via monthly billing or prepaid data — siphoning cash directly from the phone’s owner.

Transsion said it created a fix for Triada in March 2018 after reports identified its presence on W2 smartphones. Transsion said it also shipped a fix for xHelper in late 2019. In both cases, phone owners needed to download the fixes and update their phones.

Cleaves said Secure-D has continued to block transactions related to Triada and xHelper on Transsion phones into April this year, though at a lower volume than before.

“Although xHelper appears to have entered a dormant stage, we have no reason to believe it’s gone away,” he said. “There’s no reason to believe that the perpetrators behind that malware are just going to give up. They’ve got this extremely virulent malware sleeping on millions of devices, and it’s just a matter of time before they strike again.”

Mxolosi said he had no idea which company made his phone. He was surprised and disappointed to hear it was a Chinese company.

“Oh god. That means the Chinese are just ripping us off left, right, and center,” he said, comparing his malware-riddled smartphone to designer knockoffs made in China that flood South Africa. “We are getting [counterfeit versions] of clothing that are made in the US. They come in and make them with bad quality.”

Mxolosi said he was planning to buy another Tecno phone until BuzzFeed News informed him of what was wrong with his W2. Now he is looking for other options.

“Now I would never,” he said. “That device would make me spend more on that phone. So why should I go for that while we’ve having problems with money?” ●

Additional reporting by Odanga Madung.

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How Reddit Took On Wall Street

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Investors on Reddit have launched an attack that’s both trolling and serious on Wall Street firms by purchasing shares in GameStop, pushing the stock price up over 480% in a week, costing hedge funds millions of dollars, and skyrocketing young investors’ portfolios and egos.

Popular subreddit r/WallStreetBets (WSB), whose tagline is “Like 4chan found a Bloomberg Terminal,” has over 2 million members reading and posting “stonks” tips and news. Its biggest obsession in recent weeks has been raising the stock price of GameStop, the old-school video game mall retailer.

“They’re digitally doing it in a coordinated attack,” Howard Lindzon at Social Leverage, an early stage seed investment fund, told BuzzFeed News.

Lindzon thinks the investors chatting across Reddit — who tend to be millennial and Gen Z men — are just having a fun time causing trouble for hedge funds who’d bet on shares in the gaming retailer dropping. “They’re just playing a game,” Lindzon said. “And they’re having a blast.”

For months, there has been chatter encouraging WSB day traders — or “degenerates,” as they call themselves — to buy up GameStop (GME) stock. Chewy CEO Ryan Cohen has been pushing GameStop to investors for months. He owns at least 13% of the company’s stock and is now on its board, which many took to mean it would move in a more digital direction.

But Wall Street hedge funds, including Citron Research and Melvin Capital, had shorted the stock, meaning they had bet against it and needed it to drop in price in order for their investments to be successful.

After Andrew Left from Citron Research posted a video last week arguing that GameStop’s share price would soon drop to $20, people attempted to hack his Twitter account. (He subsequently called the Reddit investors an “angry mob.”)

But instead, the GME stock price rose even higher as redditors called on investors to put as much money into the company as they could. In recent weeks, some have declared they were putting their entire retirement and life savings accounts into the company, complete with lots of rocket emojis and declarations that they would not sell.

Trading of GameStop has halted multiple times over the last week because the stock price has jumped so quickly it’s triggered market protections. On Monday, the stock surged again, opening at $96 and then jumping to $159 an hour later, its highest-ever price. By the end of the day, it was back in the $70s.

On Tuesday, it opened at $88 and jumped 90% by close. In after-hours trading, it jumped another 50%, to over $230.

A year ago, the share price was $4.

“Any rational person knows this type of trading behavior is short lived,” Left told Bloomberg.

By encouraging everyday investors, also known as retail investors, to buy up GME stock and increase its price, hedge funds would have to sell out in order to cut their losses from having shorted the stock, which increases the stock price even further.

“Hedge funds are getting their asses kicked by the retail investor,” Lindzon said.

He noted that millennial investors have been sharing information across Reddit and social networks for years, but the sheer number of them now means they are a force to be reckoned with. “It’s like the velociraptors in Jurassic Park; they get smarter, and eventually they hop the fence,” he said.

The moment has also been a chance for young investors — many of whom have flocked to investing since the pandemic was declared, causing the stock market to jump, helped in part by free brokerage apps such as Robinhood — to flip the bird at established Wall Street firms.

“What I think is happening is that you guys are making such an impact that these fat cats are worried that they have to get up and put in work to earn a living,” wrote one of the WSB subreddit moderators in a post on Sunday. “That fuzzy sensation you are feeling is called RESPECT and it is well earned. Wall Street no longer dismisses your presence anymore.”

“We put the F U back in fundamentals,” one redditor wrote on Tuesday in a post about how many millions of dollars Melvin is estimated to have lost because of the GME surge.

Their actions are having a very real impact on those hedge funds. Two firms announced they were investing over $2 billion into Melvin on Monday — “an emergency influx of cash,” as the Wall Street Journal described it — aimed at stabilizing the fund.

But not all the young investors on WSB are making money from GameStop’s rise.

On Monday, David — a 25-year-old who works in corporate finance for a private tech company in the Bay Area and lives in the Midwest but asked that his last name not be used in this story — bought about $14,000 in GME stock after reading about it on WSB.

He said he’d been watching the chatter about GameStop for months but finally decided to buy in on Monday. “I just figured that the market is completely irrational and that everything I learned in college means nothing,” he told BuzzFeed News.

He bought about $7,000 worth of stock priced at $115 on Monday morning. After watching it rise, he bought another $7,000 at $155 — except that ended up being the stock’s highest point that day.

David panicked as he realized he was possibly about to lose 15% of his total portfolio. He sold all of his GME investment and only lost about $600 in total. If he hadn’t sold them just moments after buying them, by the end of the day he would have been down around $10,000 (although he would have been up by the end of Tuesday).

“Honestly, the majority of bad trades on WSB are due to FOMO,” he told BuzzFeed News over Reddit. “I paid a large (but relatively small) price to learn that lesson.”

But for many on WSB, the attitude is a mix of “eat the rich” and “get rich quick” (with some redditors saying that their investments are up millions of dollars), as well a smug joy that their trolling worked and the investing and media worlds were suddenly paying close attention to them.

“A good way to check how many hedge fund managers there are in your building is to check the pavement outside,” posted one redditor on Tuesday. “It should be covered in blood.”

“Any man that dies holding GME will be greeted by the All-Father himself in Valhalla,” another wrote.

Beyond redditors, other investors also see this moment as one when young internet investors are able to have a significant impact on the big Wall Street firms.

Alexis Ohanian, the cofounder of Reddit, believes it reflects a fundamental change. “2021: the mainstream will realize finance will be revolutionized from the bottom-up bc of the internet: Robinhood investors, Alts, crypto, the list goes on..,” he tweeted.

Tesla CEO Elon Musk, who has publicly battled with investors who’ve shorted his company and has a reputation for trolling behavior himself, tweeted a link to the WSB subreddit on Tuesday afternoon, writing, “Gamestonk!!”

Lindzon said he expects hedge funds to get smarter at handling these moments. He believes that even if there are millions of millennial investors, they can really only significantly impact one relatively small company, rather than a whole market, industry, or corporate behemoth, such as Apple.

But it’s also a reminder that stock markets are reliant on individuals, their feelings, and their actions.

“All of this is just raw human emotion masquerading around as something more profound,” wrote Peter Heilbron, the founder of wealth management company Trace Wealth Advisors, in a blog post about GameStop and Reddit. “Everyone wants to be invited to the party but no one wants to be the one left without a chair when the music stops playing… the friction that exists between those two things is what creates volatility.”

And that volatility exists until the game, well, stops.



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Alphabet, Facebook rise as Microsoft ad units do better than predicted

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Microsoft CEO Satya Nadella speaks during the annual Microsoft shareholders meeting in Bellevue, Washington on November 29, 2017. / AFP PHOTO / Jason Redmond (Photo credit should read JASON REDMOND/AFP via Getty Images)

JASON REDMOND | AFP | Getty Images

Shares of Alphabet, Facebook and other advertising-driven internet companies gained in extended trading on Tuesday after Microsoft‘s earnings report showed that its advertising businesses did better than expected.

The outcome for two parts of Microsoft that reflect advertisers’ activity could indicate improvement in global economic conditions as the coronavirus pandemic begins to respond to widespread vaccination programs.

Microsoft said its LinkedIn social network, whose Marketing Solutions division generates revenue from ads, delivered $2.58 billion in revenue in the December quarter, up about 23% on an annualized basis. Microsoft previously said that growth would be around the same as the previous quarter, which came in at 15.6%.

“LinkedIn’s advertising business had a record quarter accounting for more than a third of LinkedIn’s total revenue. LinkedIn’s Marketing Solutions was up over 50% as advertisers increasingly turned to the platform as the trusted way to reach professionals ready to do business,” Microsoft CEO Satya Nadella told analysts on a conference call.

LinkedIn has largely avoided getting caught up in political controversies, unlike Facebook and Twitter. Besides advertising, LinkedIn revenue comes from premium subscriptions and tools for recruiters and salespeople.

Microsoft’s search-advertising business, which competes with Alphabet’s Google segment, contributed $2.18 billion in third-quarter revenue, up 1%. In October Microsoft’s finance chief, Amy Hood, had forecast a decline of mid-to-high single digits (5% to 9%).

Hood also gave guidance for the current quarter.

“Our search and LinkedIn businesses should benefit from the improving advertising market,” she said.

In a note distributed to clients on Friday, analysts at Bank of America, who have a buy rating on Microsoft stock, had estimated flat revenue for the search business and 11% growth in LinkedIn.

In after-hours trading, Alphabet was up almost 1%, Facebook was up 1%, Snap rose 1% and Twitter was up almost 3%. Microsoft, meanwhile, rose almost 4% after the earnings report, which reflected strong growth in the company’s cloud computing business.

Nominations are open for the 2021 CNBC Disruptor 50, a list of private start-ups using breakthrough technology to become the next generation of great public companies. Submit by Friday, Feb. 12, at 3 pm EST.

WATCH: Jefferies Weisfeld breaks down Microsoft’s earnings


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GameStop jumps as Elon Musk tweets out Reddit board that’s hyping stock

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Tesla Motors CEO Elon Musk unveils a new all-wheel-drive version of the Model S car in Hawthorne, California October 9, 2014.

Lucy Nicholson | Reuters

Tesla CEO Elon Musk seemed to rally behind GameStop‘s epic surge on Tuesday, tweeting out a link to the Reddit board that’s largely hyped the stock.

Shares of GameStop, which jumped 92.7% Tuesday, were up more than 60% in after hours trading following Musk’s tweet, which linked to the “wallstreetbets” Reddit chat room that has more than 2 million subscribers. The Tesla CEO tweeted “Gamestonk!!”

The stock surged earlier in the day after Social Capital’s Chamath Palihapitiya said in a tweet that he bought GameStop call options, betting the stock will go higher.

Musk’s call outs to certain companies have influenced stock prices before. Earlier Tuesday, he tweeted about a hand-knit wool hat he bought for his dog on Etsy. That sent shares of the company up as much as 8% in premarket trading, though it ultimately closed down 2.1%.

The CEO has faced problems with the SEC for tweeting about Tesla’s stock. In August 2018, he said he wanted to take Tesla private at $420 per share and that he had secured the funding to do so. Musk and Tesla each had to pay the SEC a $20 million fine to settle the suit, and Musk has since agreed to submit his public statements about Tesla’s finances and other topics to vetting by its legal counsel. He infamously tweeted last year that Tesla’s stock was “too high,” sending shares even higher a week later.

— Lora Kolodny contributed to this report.

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