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Bitcoin has two meanings. Bitcoin, with a capital B, is a software protocol, or a set of rules. The monetary unit is bitcoin with a lowercase b, or BTC. Bitcoin is based on a field of computer science known as applied cryptography. The encryption algorithm used by Bitcoin is so secure that the US government requires its use for highly sensitive information. BTC is viewed similar to gold because people consider it rare, valuable, and not created from a balance sheet of a financial institution. BTC is scarce because the supply is capped at 21 million BTC. Anyone can own it and as it becomes easier to buy and understand, the demand will rise and FOMO will kick in. Since the supply is limited, the price will increase. To understand how Bitcoin is transacted, it's helpful to compare it to email. With an email address, anyone can send you a message and attach data. However, only you can open the email and access the data because you have a password. When you own bitcoin, you also get an address. This is your public key. Others can send BTC to your public key. You also have a private key, which is your password. This gives you exclusive access to your BTC account. Go to CoinDesk's Crypto Explainer+ to learn more.

Bitcoin and other cryptocurrencies threaten the authority of central banks. Central banks will respond by issuing their own digital currency. The Federal Reserve System (Fed) controls the nation’s banking system. It uses monetary policy to control the growth of the money supply. Controlling the money supply drives interest rates up or down. A surge of money in the economy means lower interest rates and consequently an increase in spending by consumers and more investment by businesses. The downside is inflation. The high inflation that we are experiencing right now is the hangover from years of low interest partying. The Fed controls the money supply in three ways: 1. Adjusts the reserve requirements for banks. Reserve requirements are the percentage of deposits that a bank must retain. The lower the reserves, the more money the banks have to loan out. 2. Changes the discount rate (interest rate) that member banks pay when they borrow money. The lower the bank's interest rate, the lower the rate they can offer its customers. 3. Buys and sells treasury securities (bonds). Buying bonds increases the money supply. If the Fed had a CBDC, it could issue money directly to people. Some countries are testing their CBDCs - China, Sweden, and Australia. On January 20, 2022, the Federal Reserve Board published a report on the Fed issuing a CBDC. The report cites benefits and risks. Some benefits include: ▸ Supports the US dollar’s international role as the world’s reserve currency. ▸ Improves cross-border payments, making it easier to send money to other countries. ▸ Reduces barriers to banking that some lower-income households experience. The primary risk is that a CBDC could “fundamentally change the structure of the US financial system by altering the roles of private sector banks and the central bank.”

MARCH 6, 2022 | Issue 05 WHAT'S YOUR VANTAGE POINT? Real estate agents are uniquely situated to see challenges from many perspectives. Your client is a seller or buyer, but the deal will not close unless a long list of people are onboard – the buyers or sellers on the other side of the transaction, the other real estate agent, attorneys, everyone involved in the mortgage approval and title, the appraiser, home inspector, and others. Communicating thoughtfully and empathetically with these parties when issues arise is an essential skill. You may even surprise yourself when non-real estate issues arise and you're able to ask the right questions to find solutions. This has happened to me over the past two weeks as I watched the Ukraine invasion through the lens of a real estate agent trying to get my arms around the myriad of crypto issues. I was ignorant about how countries can impose economic sanctions against a targeted nation. However, as economic sanctions dominated the news, I realized that my understanding of crypto gave me the ability to grasp the impact of these sanctions. I am currently reading about our financial system because enhancing by knowledge of money will enrich my understanding of crypto. When President Biden announced the freezing of Russia's central bank reserves, I knew this was going to rattle the world's financial system. The Wall Street Journal ran this story... This means that other than gold, only bitcoin is outside the control of a government. As one bitcoin analyst wrote: "Many nations are likely reconsidering how they defend themselves from a financial lockout in times of crisis. The game board has changed." The world is shifting, and educating yourself about crypto will prove invaluable as it seeps into our lives. Thanks for reading Crypto News for Realtors and telling your colleagues about it. I'd love to add them to the email list. Send their full name and email to richard.hopen@compass.com. Let's grow our community of crypto-savvy agents! Keep reaching out to me. I love meeting new colleagues around the US. I'm here to talk about any crypto issues you're contemplating. Enjoy the newsletter, have a great week, and stay crypto curious! Rich Hopen PS. You can find all CNR newsletters here. CRYPTO REAL ESTATE NEWS ▶︎ Austin Property Sells for $18.5 million in Bitcoin Entertainment industry media mogul Scooter Braun sold a lakeside Austin property for $18.5 million. The buyer was Wayne Vaughn, CEO of Tierion. Tierion provides technology tools to verify trust with blockchain transactions. ▶︎ Crypto Mortgage Lending Is Here In response to homebuyers whose assets include cryptocurrency, some new and existing mortgage lenders recognize crypto wealth. At least two companies, Milo and Ledn will finance up to 100% of a home's purchase. This will allow a buyer to hold onto their crypto and avoid having to sell it for the down payment. Buyers will receive a 30-year mortgage, which is repaid in monthly installments. ▶︎ Collective Land Ownership in Wyoming Through a DAO Wyoming passed a law in July 2021 that provided legal status to DOAs (Decentralized Autonomous Organizations) if they are registered as a Limited Liability Company (LLC). The key benefit of LLCs is that they limit the personal legal liability of its members. A small group of people purchased a 40-acre tract of land in Wyoming intending to sell pieces of the land as NFTs on the blockchain. They created a DAO, CityDAO, and divided the parcel into 10,000 NFTs. Any interested person could become a member (citizen) of CityDAO by purchasing one or more NFTs. The DAO members collectively govern and manage the land. CRYPTO NEWS ▶︎ Ukraine Invasion Crypto Update ● Ukraine crypto donations exceeded $56 million from over 100,000 transactions. This is the first time in history that citizens across the globe are funding a war involving two different countries. ● Bitcoin has outperformed equities since the Russian invasion, but not because the Russians are buying BTC. According to NYDIG, there is no data to support that the increasing volume of Russian trading is driving up the price of bitcoin. ● Sanctioned Russians are not moving assets to crypto. After sanctions were announced against individual Russian oligarchs, some politicians expressed concern that the sanctioned oligarchs would simply move their assets into crypto. This concern was dispelled by the US Treasury Department this week. Treasury stated that moving funds through crypto exchanges is not an attractive option for sanctioned Russians. The existing anti-money laundering safeguards used by exchanges are effective. ● Crypto Not a Feasible Alternative for Russia On March 2, 2022, the National Security Council's director of cybersecurity Carole House said the scale that Russia would need to circumvent all financial sanctions “would almost certainly render cryptocurrency as an ineffective primary tool for the state." ▶︎ Venture Capital Floods Crypto Sector Crypto news publication, The Block, reported that more than $4 billion of venture capital funding was given to crypto startups in February. The startups that build infrastructure tools received most of the funding. ▶︎ Bitcoin Miners in Georgia Offered Tax Incentives A bill was filed in Georgia exempting a "sales and use tax" for commercial mining of digital assets. Kentucky passed a similar law to attract miners to their state. CRYPTO CLASS - Central Bank Digital Currency (CBDC) Bitcoin and other cryptocurrencies threaten the authority of central banks. Central banks will respond by issuing their own digital currency. The Federal Reserve System (Fed) controls the nation’s banking system. It uses monetary policy to control the growth of the money supply. Controlling the money supply drives interest rates up or down. A surge of money in the economy means lower interest rates and consequently an increase in spending by consumers and more investment by businesses. The downside is inflation. The high inflation that we are experiencing right now is the hangover from years of low interest partying. The Fed controls the money supply in three ways: 1. Adjusts the reserve requirements for banks. Reserve requirements are the percentage of deposits that a bank must retain. The lower the reserves, the more money the banks have to loan out. 2. Changes the discount rate (interest rate) that member banks pay when they borrow money. The lower the bank's interest rate, the lower the rate they can offer its customers. 3. Buys and sells treasury securities (bonds). Buying bonds increases the money supply. If the Fed had a CBDC, it could issue money directly to people. Some countries are testing their CBDCs - China, Sweden, and Australia. On January 20, 2022, the Federal Reserve Board published a report on the Fed issuing a CBDC. The report cites benefits and risks. Some benefits include: ▸ Supports the US dollar’s international role as the world’s reserve currency. ▸ Improves cross-border payments, making it easier to send money to other countries. ▸ Reduces barriers to banking that some lower-income households experience. The primary risk is that a CBDC could “fundamentally change the structure of the US financial system by altering the roles of private sector banks and the central bank.” INFLUENCERS - People to follow Michael Saylor – @saylor Saylor is the CEO of MicroStrategy, a publicly-traded data analytics firm that has been buying bitcoin since August 2020. The company holds 125,051 bitcoins, valued at $5.31 billion. MicroStrategy owns more bitcoin than any other corporation in the world. By comparison, Tesla owns 42,000 coins. The company’s shares have doubled in price since the company first started buying bitcoin. Saylor actively promotes bitcoin. He tweeted on March 3, 2022: "'What is money?' is a question that economists have pondered for centuries, but the blocking of Russia’s central-bank reserves has revived its relevance for the world’s biggest nations –particularly China. Bitcoin is money. Everything else is credit." RESOURCES – Books, websites, podcasts, articles NYDIG delivers Bitcoin products for banking, fintech, nonprofits, and insurance companies. Their research page has interesting reports and their emails are packed with great insights. CRYPTO WORDS – Sharding is when a blockchain is split into multiple, identical chains called “shards.” These shards each execute transactions and smart contracts in parallel, making a network more efficient and scalable. Sharding does not undermine blockchain's security. OH, ONE MORE THING – Baseball card trading company Topps sold its first edition 1952 Mickey Mantle baseball card as an NFT for $471,000. This is the highest-priced sports NFT ever sold. The NFT was officially licensed by MLB and sold in cooperation with the Mantle estate. The winner also received a 30-minute interview with Mickey Mantle's two sons. Thanks for reading! See you next week. Go to Crypto News for Realtors to read previous issues.

FEBRUARY 27, 2022 | Issue 04 TAKE A DEEP BREATH. PAUSE. READ. Too many agents and friends are repelled by the complexity of crypto. They grab onto the latest headline, usually a significant drop in the price of bitcoin or a hacking incident, and dismiss the entire industry as a "house of cards" whose collapse is inevitable. Instead of rushing to judgment about crypto, I urge them to invest time by reading and learning. I ask for their email address and send them Crypto News for Realtors. It's a first step, but an important one. Reading something longer than ten seconds is a big ask of anyone. We're all being pulled in many directions, especially on our social media feeds. However, understanding any issue that is important, requires focus. When you have a listing consultation, you find the time to learn about your prospect's house and the market conditions. You may memorize a few salient facts and drop stats on absorption, median sale price, and trends. This is good. Other agents go further. They will dig deeper and may learn about what drives interest rates and how a rate change will impact buyer demand for homes at different price points. Agents who know more and who can explain it to others will stand out. Strive to be that agent. You are reading this newsletter, because you want to learn about crypto's impact on real estate. That's great! Consider digging deeper by clicking links and seeing what's behind the story. As always, feel free to reach out to me. Please tell any agent or others about Crypto News for Realtors. I'd love to add them to the email list. Send their full name and email to richard.hopen@compass.com. Enjoy the newsletter, have a great week, and stay crypto curious! Rich Hopen PS. You can find all CNR newsletters here. CRYPTO REAL ESTATE NEWS ▶︎ Will You Offer NFTs to Your Sellers? I was asked by a prominent industry reporter about the future of NFTs in residential real estate. Below are his questions and my answers. Does anything excite, or at least intrigue you, about NFTs? NFTs can be a great marketing tool for the right type of listing. NFTs are new and associating one to a house is likely to attract attention from agents and the media. NFTs may attract collectors who like the idea of buying an NFT attached to physical real estate. Essentially, it's an NFT collateralized by a house. I'm interested to see how receptive real estate agents will be when learning how NFTs can be used for their listings. For you, what possibilities do NFTs and putting deals on the Blockchain hold? One possibility is that a homeowner with an NFT could keep the NFT on an NFT marketplace. It could be listed for a high enough price that a seller would happily accept the offer. There's a startup that is working on this, Fractal Prop. Once lenders, title companies, real estate agents, buyers, and sellers are comfortable moving real estate transactions to NFTs, the home buying process will become streamlined. And, the risk of real estate wire fraud could be eliminated. What concerns do you have about NFT's applications in real estate? A buyer or seller may not have been properly advised of the risks associated with an NFT real estate transaction and they could end up losing money or incurring legal liability. Buyers, sellers, and agents who jump into the NFT space understand what they're doing. When NFTs are used to transfer ownership of a property, the pool of buyers and sellers is a small slice of the market. These NFTs are limited to sellers who don't have a mortgage and to buyers who don't need a loan. Do you see NFTs affecting your business in the next year? In the next five? Absolutely. I will offer an NFT option to sellers within the next year. ▶︎ What's Stranger Than Selling a House as an NFT? Buying a Virtual Property With a Mortgage! Last week, I discussed JPMorgan's report about Opportunities in the Metaverse. The report stated, “In time, the virtual real estate market could start seeing services much like in the physical world, including credit, mortgages and rental agreements.” One of JPMorgan's predictions came true this week. The first mortgage for virtual land was reported by Jamie Redman in Bitcoin.com. Redman reported that Terrazero Technologies is offering loans to people who want to purchase virtual land. Terrazero's founder said, "The deed is essentially an NFT. We hold that in the company's cold storage until the loan is paid off. But we give developer rights to the land so that the person can build whatever they want. If the customer doesn't pay, then obviously we have that as our collateral." ▶︎ Startup Vesta Equity Offers NFT Alternative to Home Equity Loans Homeowners who own their homes outright may now sell fractions of ownership through an NFT that is "minted" by VestaEquity VestaEquity lists the NFT on their marketplace and sells the property to investors. When a buyer/investor purchases the NFT, the seller receives payment and there are no loan payments. The seller may elect to buy back what they had previously sold. When the seller sells their home, the NFT owners are paid their equity share of the property. CRYPTO NEWS ▶︎ Crypto, Russia & Ukraine - Is Crypto Helping the Good Guys or Bad Guys? The Western allies agreed to expel Russian banks from the Swift payment systems. Swift (Society for Worldwide Interbank Financial Telecommunications) connects over 11,000 financial institutions enabling them to transfer money around the world. Swift transfers tens of billions of dollars a day. Banning Russia from Swift was referred to as the “nuclear option,” because its impact will likely be severe. It will stop Russia’s imports and exports and may cause massive inflation in Russia. It could severely devalue the Russian currency and freeze their economy. As pressure on the Russian economy increases, many wealthy Russians who are sanctioned, may consider purchasing bitcoin. What will governments do if targeted Russians move their assets to bitcoin? Will there be legislation, regulations, policies, or executive orders beyond existing anti-money laundering laws (AML)? If the focus is shifted from crypto as a money-laundering tool to Ukraine’s efforts to bolster its defenses against the Russian invasion, crypto will be viewed differently. The Ukraine government reached out to the crypto community through its official Twitter account. The tweet provides addresses where donations should be sent. Forbes reported that more than $4 million in crypto donations were received by Ukraine within hours after posting their plea for help on Twitter. Is crypto good or bad? The answer is complicated. Be wary of any governmental policy that hasn't debated the nuances. ▶︎ Crypto Trading Platform Coinbase Reported $2.2 billion in revenue from transaction fees in Q4 and Hires Goldman Sachs Exec. Coinbase doubled transaction revenue from Q3 to Q4, exceeding analysts' predictions by 27%. Coinbase also announced it was hiring Roger Bartlett, former global co-head of operations at Goldman Sachs. Bartlett will lead Coinbase's global financial operations. CRYPTO CLASS - Web 3.0 Before explaining Web 3.0, let's take a quick look at the evolution of the web. Web 1.0 was the internet from 1991 to 2004. Websites were essentially static pages. A user would log onto the internet and access information from a website. As an OG ("old guy," not "original gangster"), I remember the excitement of being one of the first environmental lawyers in the US to launch a website in 1996. In 2004, Web 2.0 began and it ushered in the era of user-created content, the spark of social media. A handful of large tech companies control the applications that allow us to engage with each other. Our likes, comments, and time we spend on their sites gives them access to how we think and feel. They monetize our personal data. Over the last few years, we've seen the dark side of Web 2.0. There have been breaches of privacy, mis- and disinformation campaigns. Authoritarian governments have accessed this data, giving them power to manipulate public opinion. Web 3.0 offers a solution to these problems that are founded on decentralization. Blockchain technology will encrypt a user's data and distribute it over thousands of nodes. No company will be able to access or monetize the data. (See Crypto News for Realtors Blockchain discussion.) Here's how Web 3.0 is taking shape. ◎ Decentralized Autonomous Organizations (DAO) are an alternative to incorporating. DAOs are organizations based on rules that are encoded into software and controlled by its members. There is no centralized leadership and its members own the DAO. The largest DAO by market cap is Uniswap ($5.6 billion). Here's a fascinating example of how a group of like-minded people can come together to form a DAO. In November 2021, ConstitutionDAO was created. Its purpose was to purchase an original copy of the US Constitution that Sothebys planned to auction. In just a few days, the DAO raised $43.2 million in ETH cryptocurrency. The DAO lost the bid and refunded the money to its members. ◎ Decentralized Finance (DeFi) allows users to exchange currency and financial instruments without banks, brokerages, or other financial organizations. Some examples for DeFi include asset management, payment solutions, peer-to-peer (P2P) lending and borrowing, and digital identity. The DeFi market cap is $71.8 billion. See DeFi Pulse for info and links to top DeFi platforms. INFLUENCERS - People to follow Cathie Wood – @CathieDWood Founder of Ark Investment, a fund that focuses on companies with innovative technologies. She invests in blockchain, AI, robotics, 3-D printing, DNA sequencing, and energy storage. Wood supports crypto and predicts that bitcoin will reach $1.3 million by 2030. Last July, Wood interviewed Elon Musk and Jack Dorsey at the B Word Conference. Here's the full interview. RESOURCES – Books, websites, podcasts, articles I listen to CoinDesk's daily podcast, The Breakdown with NLW every day. Nathaniel Whittemore (NLW) always provides spot-on summaries of key crypto news along with intelligent commentary. CRYPTO WORDS – FUD stands for "fear, uncertainty, doubt." Many crypto commentators attribute negative news to FUD. OH, ONE MORE THING – Are you engaged or know someone who is? If so, look at the below tweet. I forwarded it to my daughter who is engaged, but she scoffed at it. She prefers for her wedding gifts to be in USD and not BTC. Thanks for reading! See you next week. Go to Crypto News for Realtors to read previous issues.

FEBRUARY 20, 2022 | Issue 03 I FEEL CONFLICTED. I NEED YOUR HELP. I've been fascinated with crypto since last March and I can't get enough of the topic. So many pieces of it interest me – NFTs, smart contracts, bitcoin's inevitable impact on global finance, blockchain, the metaverse, and a lot more. Distilling the most relevant parts of this new world into a short, easily understood weekly newsletter for real estate agents helps me learn. And I'm having fun. However, I struggle with how deep I should dive into a topic. I assume that as long as I keep my writing clear and the subjects interesting, you'll read the entire newsletter. If you do this weekly, you will become a crypto-savvy agent. As crypto starts infiltrating our daily lives, just has social media has done, you'll become the leading crypto agent in your market – setting you apart from the pack. This is my vision. However, I need a reality check. Please send me an email and tell if you read the entire newsletter or just skim it. Also, to those of you who have reached out to me, thank you! It's been great emailing, texting, speaking, and having video calls with agents, tech folks, and managers about the newsletter. Please tell others about Crypto News for Realtors. I'd love to add them to the email list. Send their full name and email to richard.hopen@compass.com. Enjoy the newsletter, have a great week, and stay crypto curious! Rich Hopen PS. You can find all CNR newsletters here. CRYPTO REAL ESTATE NEWS NFT Tampa House Listing Agent Answers Questions Amy Heckler, the listing agent for the NFT Tampa house answered questions on Facebook Live. (Link to watch the February 18, 2022 session.) Heckler said that setting up the NFT (non-fungible token) auction required many calls with attorneys, title companies, and auction houses. The seller flips houses and has worked with Heckler for years. The seller owns a company that sells NFTs and was interested in selling her house as an NFT. It would help her business and brand. The seller engaged Propy to assist with the NFT auction. The sale was structured so buyers could either submit offers through their agent or bid for the house in an NFT auction. Offers submitted by agents would not be accepted before the NFT auction. The winner of the NFT auction would acquire ownership and control of a corporation that included the house as an asset. Here's how it played out. There was a lot of interest in the property and the open house was packed. Heckler received "many offers" well above list price. The auction was held and two bids were submitted. Since the bids were above the reserve price, the seller was required to accept the highest bid. Heckler said the agent-submitted offers were higher than the winning NFT bid. Heckler discussed other issues that arose during the transaction: ▸ All NFT interested bidders needed to show proof-of-funds (adequate cryptocurrency) before receiving details of the NFT. Essentially, all auction bidders were "cash buyers." ▸ The house didn't have a mortgage or any liens. If it had, it could not have been sold as an NFT. ▸ The seller paid the listing broker's commission after the auction. ▸ Florida real estate law requires payment of a transfer tax that is typically paid in escrow. Since there was no escrow, the seller paid the transfer tax after the auction. ▸ The seller conducted a title search. However, no Florida title insurance company would issue a policy. Heckler and the seller worked through all the issues and accomplished their goal of being the first house sold as an NFT in the U.S. NFT purchases for real property is in its infancy. Agents and sellers working on the next NFT transaction will learn from this one. Instead of merely watching NFTs evolve, be a pioneer in your market and consider offering an NFT with your next listing. CRYPTO NEWS ▸ JPMorgan, the largest bank in the U.S., opened up a lounge in the virtual world, Decentraland. (If you want to get a glimpse of the future, allocate at least 30 minutes and visit Decentraland. It is very trippy!) Their announcement coincided with the release of a report, Opportunities in the Metaverse. The report covers how virtual world technology has evolved and where it may be going. It discusses the economic opportunities, including virtual real estate. Parcels of virtual land doubled in price in six months in 2021. It increased from $6,000 to $12,000 across the four main metaverses (Decentraland, The Sandbox, Sominum Space, and Cryptovoxels). The appreciation has been driven by brands buying up space. One land package was purchased for $913,000 by developer Every Realm. They intend to build a shopping district. “In time, the virtual real estate market could start seeing services much like in the physical world, including credit, mortgages and rental agreements,” said the JPMorgan report. ▸ Disney Named Senior Vice President to Lead the Metaverse Strategy. Mike White will be in charge of "next generation storytelling." ▸ Crypto Influencers Alarmed by Canadian Government Actions. Actions by the government to quell the protests by truckers against Covid-19 rules sent shock waves through crypto twitter. The actions called for freezing bank accounts and crypto wallets. A reminder to crypto holders who want to control their cryptocurrency to keep their private keys off of an exchange. (Private keys are passwords that control access to an owner's crypto currency.) ▸ Crypto Super Bowl Ads. There are usually a handful of outstanding ads and my favorite one this year was for crypto exchange FTX. Below is the data on how the crypto ads performed. The very funny commercial starring Larry David is at the bottom of the newsletter. CRYPTO CLASS - Blockchain Let’s start with the basics. Spreadsheets like those in Excel or Google Sheets easily store information. You probably keep a spreadsheet to manage your business or personal expenses. It’s a great tool for one person or a small group of people. When there’s a large amount of data that needs to be accessed by multiple users, a database is needed. A database usually structures its data into tables. A blockchain behaves differently. Data is gathered in groups or blocks. A block has a limited storage capacity and when the block is full, it is closed. It is then linked to the previously filled block. This continues and a chain of blocks are linked together – brilliantly referred to as the blockchain. One superpower of the blockchain is that the data cannot be changed or deleted. It is immutable. Here’s how that works. A blockchain doesn’t live on a single server farm in a warehouse. The blockchain data is spread out amount many network “nodes” throughout the world. According to bitnodes, there are currently 15,181 Bitcoin nodes. It’s decentralized. Spreading out the data allows for redundancy. Unlike a company that stores all its data in one location, if a power outage or natural disaster occurs at a network node, the blockchain isn’t impacted. It also ensures that the data isn’t changed. If someone running a node is a bad dude (yes, there are hackers who aspire to steal bitcoin) and alters data on their node, the other nodes in the blockchain will not be impacted. Blocks are stored linearly and chronologically. It’s an ingenious way to keep records. Blockchains can be public or private. The Bitcoin blockchain is public or “permissionless.” Anyone can join the network. All blockchains are secured with cryptography. Private blockchains are being used by companies such as Walmart for supply management. Healthcare providers are storing their patients’ medical record. Property records in county recorders’ offices are ripe candidates for blockchain. Go to Investopedia to learn more. INFLUENCERS - People to follow Jack Dorsey – Cofounder of Twitter. Founder of Block, a group of companies including Square, that focus on payment systems, tools, and services for small businesses. Dorsey has been a vocal supporter of crypto and announced that Block will develop an open Bitcoin mining system that will build equipment and software to allow more people to mine Bitcoin. Square, renamed Block, will build an “open Bitcoin mining system.” Bitcoin miners are the technologists who maintain the blockchain. Dorsey is developing a team of engineers to help build equipment and software that will allow more people to mine bitcoin. Dorsey has criticized the unchecked power that venture capitalists are having on the development of Web 3.0 (next generation of the internet). RESOURCES – Books, websites, podcasts, articles Renowned Silicon Valley venture capital firm Andreesen Horwitz, known as a16z, has brilliant articles and papers on all aspects of crypto. There are also fascinating class videos from their crypto school. My favorite talks were from Chris Dixon and Balaji Srinivasan. CRYPTO WORDS – Fiat is government issued currency, such as the U.S. dollar (USD) or China’s renminbi (RMB). Here's the best Super Bowl ad. It's preety, preety good. Thanks for reading. See you next week. Go to Crypto News for Realtors to read previous issues.

FEBRUARY 13, 2022 | Issue 02 CNR LAUNCHED LAST WEEK. NOW WHAT ? This was a HUGE week for real estate crypto and I'm excited to share what happened with the Tampa house that was auctioned as an NFT. But first, thank you for reading last week's pilot issue. The response was terrific and it meant a lot to me when readers took a few minutes to send me an email. This newsletter is for you, real estate agents who are crypto curious. If there's something in crypto world you want me to explain, let me know. I added two sections to CNR – Crypto Words and Crypto Class. Like any field, there are terms insular to practitioners. Unless you understand the language, you'll remain an outsider. Crypto Words will define a term for you to learn and use. Crypto Class will introduce a core crypto subject with a link to learn more. So, let's jump back down the crypto rabbit hole ... CRYPTO REAL ESTATE NEWS Tampa House Sold as an NFT - A First In the U.S. After a two-day delay, 6315 11th Ave S, Gulfport, FL became the first house in the US that sold as an NFT (non-fungible token). The house was listed for $650,000 and after a six-hour auction, there were two bids. The purchase price was $653,000, or 210 ETH in cryptocurrency. The NFT was orchestrated by Propy, a crypto real estate startup. Propy masterfully created a lot of media attention which likely contributed to the bids. The house was listed on the MLS and had received offers, but those interested buyers were told that the online NFT auction bids would be considered first. The winning bidder received an NFT that included ownership of a corporation. The house is an asset of that corporation. NFTs are non-fungible tokens which are commonly associated with graphic images such as CrypoKitties, CryptoPunks, and Bored Ape Yacht Club. The top selling NFT over the past 24 hours, as profiled on Blockchain is SuperRare #6623 which sold for $652,569. It seems crazy to a non-collector that someone would pay $652,569 for a unique graphic image. However, it seems reasonable that a bidder could buy a house for the same amount of money. All real estate agents should pay attention to this new way of selling a house. It will gain traction in crypto-friendly markets. Upcoming Google Meet with Tampa NFT House Listing Agent Amy Heckler Amy Heckler, the listing agent for the NFT house will host a Facebook Live on Thursday, February 17, 2022, at 1:30 pm. Go to https://fb.me/e/3kGRhT4uH. She'll discuss the process of listing the house on the MLS while the seller was working with Propy to auction the house as an NFT. This is going to be a very interesting call. CRYPTO NEWS In 2016, Bitfinex, one of the largest cryptocurrency exchanges, was hacked. The thieves stole 119,754 bitcoin, which was valued at $74.8 million. On Tuesday, the Justice Department seized over $3.6 billion in bitcoin and arrested a married couple accused of money laundering. This is the largest financial seizure in DOJ's history. The couple, Dutch Lichtenstein and his wife, Heather Morgan (left), created a lot of buzz in the crypto world. Morgan, an aspiring rapper known as "Razzlekhan," had a following on social media. (Warning: her rap video will make you cringe! Opening verse - "This song is for all the entrepreneurs and hackers.") And... Netflix is going to make a docu-series about the couple. • This week, Consulting firm PwC released its global crypto hedge fund report. Key takeaways: 1) total assets under management increased from $2 billion in 2020 to $3.8 billion in 2021; 2) returns were 30% in 2019 and skyrocketed to 128% in 2021; 3) majority of investors in crypto hedge funds are high-net worth individuals (54%) or family offices (30%). CRYPTO CLASS - Bitcoin Bitcoin has two meanings. Bitcoin, with a capital B, is a software protocol, or a set of rules. The monetary unit is bitcoin with a lowercase b, or BTC. Bitcoin is based on a field of computer science known as applied cryptography. The encryption algorithm used by Bitcoin is so secure that the US government requires its use for highly sensitive information. BTC is viewed similar to gold because people consider it rare, valuable, and not created from a balance sheet of a financial institution. BTC is scarce because the supply is capped at 21 million BTC. Anyone can own it and as it becomes easier to buy and understand, the demand will rise and FOMO will kick in. Since the supply is limited, the price will increase. To understand how Bitcoin is transacted, it's helpful to compare it to email. With an email address, anyone can send you a message and attach data. However, only you can open the email and access the data because you have a password. When you own bitcoin, you also get an address. This is your public key. Others can send BTC to your public key. You also have a private key, which is your password. This gives you exclusive access to your BTC account. Go to CoinDesk's Crypto Explainer+ to learn more. CRYPTO WORDS - BTFD Buy The F'ing Dip. When BTC plummets in price, bitcoin enthusiasts view this as a buying opportunity. RESOURCES – Books, podcasts, videos, articles UNCHAINED Podcast is hosted by former Forbes senior editor Laura Shin. Shin has top guests from a broad spectrum of crypto areas. She also has a terrific daily email service. INFLUENCERS - People to follow Satoshi Nakamoto On October 31, 2008, Satoshi published a white paper announcing the creation of bitcoin. “A purely peer-to-peer version of electronic cash would allow online payment to be sent directly from one party to another without going through a financial institution.” Satoshi’s identity is unknown and some suspect it may not have been one person, but several people. The white paper was sent to a small online group called the Cryptography Mailing List. It proposed a new monetary instrument. His proposal was well received. According to New York Digital Investment Group, in 2021, 46 million Americans, or 22% of the US adult population, own Bitcoin. All cryptocurrencies have a market cap of $1.97 trillion. What do you think of Crypto News for Realtors? Is it helpful and an interesting quick read? I'd love to hear your feedback. Also, if you know someone who would like to subscribe to this newsletter, contact me at richard.hopen@compass.com and share their email and full name. Thanks! Rich Hopen

FEBRUARY 6, 2022 | Issue 01 WHY A WEEKLY EMAIL ABOUT CRYPTO? Imagine you are a real estate agent in 1996. You’ve been hearing about this new thing called the Internet and the World Wide Web. You don't pay much attention to the constant drip of stories, but eventually you realize it isn't going away and you should understand what the Internet is and how it's relevant to your world. You decide to learn more by subscribing to a newsletter which was mailed to you. Fast forward 26 years and we are on the cusp of another revolution. You've been hearing about cryptocurrency, bitcoin, NFTs, crypto mining, and even virtual real estate. What is all this stuff and how will it change your life as an agent? You want to gain a basic understanding, but you don't know where to begin and how to keep up. I felt the same way. After the well-known digital artist Michael Winkellmann, known as Beeple, sold a digital picture in an NFT (non-fungible token) for $69 million at a Christie’s auction on March 11, 2021, I was intrigued and determined to learn more. I had a selfish reason for wanting to learn more about NFTs. My son, Matt Hopen, was studying art at Pratt Institute and I wondered how the financial opportunities for artists would be changing. Educating myself about NFTs led me to blockchain, cryptocurrency, and unusual concepts that stretched my mind – stable coins, DeFi (decentralized finance), DAOs (decentralized autonomous organizations), and the metaverse. The more I learned, the more I realized how little I knew. Eventually, the conceptual puzzle pieces started to form an image. Not a static picture, but a slow moving video. The crypto space is evolving and it’s difficult keeping current. I stay informed by reviewing numerous sources daily. I'm enthusiastic about sharing what I'm learning with fellow agents who are crypto curious. So grab my hand and let's jump down the crypto rabbit hole...... CRYPTO REAL ESTATE NEWS First US House to be Auctioned as an NFT On Tuesday, February 8, 2022, an MLS-listed house in Gulfport, FL will be auctioned as an NFT. The NFT listing was set up by a crypto real estate startup, Propy. NFTs are non-fungible tokens which are commonly associated with graphic images which wealthy celebrities and speculators buy, sell, and collect. However, the mechanism for creating NFTs and its utility can also be applied to buying and selling physical items. The Pinellas County property had an open house yesterday, and the listing agent, Amy Heckler, told me the turnout was tremendous. According to a local TV news story, multiple offers have been received. However, hopeful buyers who submitted traditional offers through their agent, have to get in line behind the NFT bidders. The seller will first review NFT auction bids and if none are accepted, the seller will review the offers submitted by agents. There are some restrictions for those bidding for the NFT: • The buyer must be an individual, not an entity. • The buyer must pay 100% of the bid, no mortgages allowed. • Payment must be in cryptocurrency. The auction winner will receive a digital certificate showing ownership of a corporation, the house is an asset of the corporation. On Monday, February 7, 2022, details of the property and the NFT bidding process will be released. Before then, I have some initial questions: 1) If no title company is involved in the transaction, how will the buyer know they are getting clear title? 2) If an agent went to the open house and presented a written offer, what will happens if that buyer also bids for the NFT and wins? Is the bidder’s agent the procuring cause and entitled to a commission? If so, who pays the buyer’s commission? 3) If the property is sold at auction, does the listing agent still receive their commission? If so, what is the mechanism for payment? While there are questions, and most likely unsatisfactory answers, congratulations to the listing agent, seller, and Propy for launching this listing. Next week, I’ll provide an update on the sale. CØMPASS Agent Lists House & NFT When Susan Vanech listed 6 Rockland Pl, Westport, CT, she decided to test the NFT waters. In addition to listing the property on the local MLS, the agent paid an artist to create a 360-degree moving graphic image of the property and had it “minted” as an NFT on the marketplace Rarible. I asked Susan how agents have responded to the NFT offering. She said, “Not a single agent understood. A handful of buyers did. One couple said they have been referring to the the house as the “ ‘NFT House.’" Susan added, "I enjoy having more to share about the home than the stone counters and hardwood floors!” CRYPTO NEWS • The Securities and Exchange Commission (SEC) said that it is delaying its decision whether or not to allow a bitcoin ETF. The application was submitted by Grayscale. • January was a tough month for crypto markets and the stock market. CoinDesk's Nathaniel Whittemore (NLW) said the megatrend was a shift from "risk-on" to "risk-off." Meaning, investors sold stocks and crypto and shifted to lower risk investments, such as US Treasury Bonds. Venture investment in crypto hit $4.4 billion in January. • Play-to-earn games allow players to earn money on blockchain-based platforms. Axie Infinity has 3 million daily users. Its popularity grew in the Phillipines in 2021 because proficient players often earned more than the country's minimum wage. RESOURCES – Books, podcasts, videos, articles • CoinDesk should be a bookmark for any agent interested in learning about crypto. It covers all the key crypto issues and offer free subscriptions to many newsletters. INFLUENCERS - People to follow Vitalik Buterin @VitalikButerin Vitalik wrote a white paper arguing that bitcoin's potential was stifled because it lacked a language for applications. He created Ethereum. Today it has a $354B market cap. Vitalik's net worth is $1.5B per Forbes. What do you think? Is Crypto News for Realtors helpful and an interesting quick read? Shoot me an email at richard.hopen@compass.com. If you know someone who would like to subscribe to this newsletter, please go to cryptonews@compass and share their email and full name. Thanks!

In 2017, my wife and I became victims of real estate wire fraud when we sold our house. Cybercriminals changed the mortgage payoff wiring instructions and the title company wired $239,000 into the criminal’s bank account instead of our mortgage account. After a very stressful eighteen months, the matter was resolved when the title company’s E & O carrier paid the mortgage balance. (Watch this video to learn how the hackers stole our mortgage payoff.) I vowed to help home buyers and sellers avoid becoming wire fraud victims. I educated myself on how real estate wire fraud occurs and how to avoid it. It is now my practice to incorporate a wire fraud discussion into every consultation with buyers and sellers. All real estate agents should do the same thing and here’s why: Most buyers and sellers do not read the wire fraud warning in email footers, leaving them vulnerable. Most buyers and sellers do not read or understand the wire fraud disclosure included in offer packages. One in three real estate transactions is targeted by wire fraud criminals [ALTA 2021 Wire Fraud Survey]. It’s very difficult to recover wired funds once diverted to criminals. Losing a deposit, down payment, closing funds, proceeds, or a mortgage payoff can cause irreparable financial hardship to buyers and sellers. Real estate agents have a unique relationship with buyers and sellers. Agents are trusted advisors and buyers and sellers will follow their guidance. Discussing wire fraud and how to avoid losing money will set the agent apart from their competitors. It highlights the agent's industry expertise and genuine concern about their client's financial well-being. Informing prospective clients about wire fraud leaves a strong impression and I typically discuss it at the end of my consultation. Everyone has thanked me for educating them. Here is a suggested script for real estate agents. Wire fraud script for buyers "There’s one more thing I need to discuss with you and it’s very important. It’s perhaps the most important thing you’ll hear from me today. It’s about protecting yourself from a problem that buyers and sellers know nothing about and neither do a lot of real estate agents. I want to talk about real estate wire fraud. Buyers are at risk of losing their deposit and down payment. Sellers are at risk of losing their proceeds or their mortgage payoff. Here’s how it happens. As a buyer, you pay a deposit and down payment. When these funds are wired to the attorney’s office or title company, there’s a risk that the money could be diverted to a criminal’s account if certain precautions aren’t taken. Here’s how the funds could get stolen. Criminals may try to hack into an email account of someone in your transaction. It could be the other real estate agent, someone in the lawyer’s office, or even the title company. If the criminal finds the wiring instructions for your deposit or down payment, they would change the account number where the funds will be deposited. They would then email you revised wiring instructions from a fake email address that is similar to one of the parties in the transaction. If you didn’t notice the revised wiring instructions were fraudulent and you wired your money into a criminal’s account, the odds of recovering the money are very slim. When we get close to writing up an offer, I will walk you through some simple procedures to protect your money. Do you have any questions?" Wire fraud script for sellers "There’s one more thing I need to discuss with you and it’s very important. It’s perhaps the most important thing you’ll hear from me today. It’s about protecting yourself from a problem that buyers and sellers know nothing about and neither do a lot of real estate agents. I want to talk about real estate wire fraud. Buyers are at risk of losing their deposit and down payment. Sellers are at risk of losing their proceeds or their mortgage payoff. Here’s how it happens. As a seller, your proceeds will be wired into your bank account by the title company or settlement agent. Several days before the closing, the title company, settlement agent, or attorney will ask you to provide wiring instructions for your proceeds. If you email this information, you are exposing yourself to wire fraud. Here’s how your proceeds could get stolen. Criminals may try to hack into an email account of someone in your transaction. It could be the other real estate agent, someone in the lawyer’s office, or even the title company. If the criminal finds the wiring instructions for your proceeds, they would simply change the account number to where the funds will be deposited. The criminal would then email their revised wiring instructions to the person who will wire the funds. Their email address will be similar to your email. Not only are your proceeds at risk, so is your mortgage payoff. Your mortgage balance will be paid at closing. If that payment is wired, it could be stolen. Before closing, you’ll be asked to contact your mortgage bank and obtain a mortgage payoff letter. The letter will include the mortgage balance and wiring instructions. If hackers obtain the payoff wiring instructions, they will change the account number from your mortgage account to their bank account. They will then send the wiring instructions to the party who requested it. That may be your attorney, someone at the title company, or settlement agent. Once the money is wired into the wrong account, the odds of recovering it are very slim. I know this is alarming information. However, after you find a buyer and we have a firm closing date, I will walk you through several simple procedures you can follow to ensure your money is protected. How does that sound?” Advice during the transaction While some sellers and buyers use bank checks, most use wire transfers. If you practice the above script, you’ll become comfortable explaining real estate wire fraud to your prospects. Once a transaction is moving forward, here are best practices to share with your client about wire transfers – Confirm wiring instructions by phone. Call a known number before transferring any funds. Don’t call phone numbers or click links from an email. Be suspicious of any emails that include changes in wiring instructions and payment information – title companies don’t usually communicate that information via email. When responding to an email, hit forward instead of reply, and type in the recipient’s email address. This can clarify whether an email came from a fraudulent, spoofed source or the legitimate email address. Ask your bank to confirm the name on the account before sending a wire transfer. As soon as a wire transfer is sent, call the recipient to verify that the funds have been received. Sellers with mortgages, should call their mortgage lender immediately after closing to confirm the mortgage payoff was received. The sooner a consumer detects that their money was sent to the wrong account, the greater the likelihood the money will be recovered. If it is discovered that someone in the transaction wired money into the wrong account, it's imperative to act quickly. The following steps should be taken immediately: Report the fraudulent wire transfer to the sending and receiving banks. Contact the sending bank’s fraud department and initiate a swift recall on the wire. Request a recall of the wire be sent to the receiving bank. Provide the wiring details and ask the bank to alert all other banks that may have received your funds to place a fraud alert or security hold on the funds so they’re not withdrawn or transferred to another account. Request the bank initiate the FBI’s Financial Fraud Kill Chain. Report any fraudulent activity to the FBI via its Internet Crime Complaint Center – www.ic3.gov and call your local FBI field office to assist in the recovery of your funds. Inform all parties in the transaction of the fraud, including the title insurance carrier. As real estate agents inform their prospects and clients of wire fraud and how to avoid becoming a victim, the incidents of wire fraud will decline. If you have any questions or wire fraud stories you'd like to share with me, please contact me at richard.hopen@compass.com. Rich Hopen worked closely with ALTA to create www.stopwirefraud.org. He also: sat on a wire fraud panel with a U.S. Senator; participated in a roundtable discussion with the FBI, ALTA, the Mortgage Bankers Association, American Bankers Association, and NAR; was interviewed and quoted by HousingWire and the Wall Street Journal; and has spoken to many real estate offices and organizations.

How these scams happen, and how to prevent them Published in Inman, July 18, 2018. Written by Richard Hopen

Cybercriminals increasingly target real-estate deals, breaking into email accounts to craft custom scams [This article appeared in the Wall Street Journal, July 19, 2019 and was written by Adam Janofsky] Last August, Robert Masucci and Clare Falbe Masucci sold their house in Glen Ridge, N.J., for about $840,000 after owning it for 30 years. About an hour after the transaction closed and the profits from the sale arrived in their bank account, their lawyer received an email purporting to be from Mr. Masucci, instructing the lawyer to send the payout somewhere else. After calling Mr. Masucci, the lawyer realized it was a scam—but the couple’s troubles weren’t over. About three weeks later, New Jersey community lender Gibraltar Bank sent them a notice saying their latest mortgage payment hadn’t been received. The Masuccis thought their mortgage had been paid off immediately after the house was sold. It turned out the funds earmarked for Gibraltar Bank had gone astray. Cybercriminals are increasingly targeting real-estate professionals, title agents and lawyers involved in buying and selling homes. In many cases, hackers compromise the email account of one party and read through correspondence to craft custom scams, often stealing hundreds of thousands of dollars at a time. If the fraud isn’t quickly discovered, funds can be difficult or impossible to recover, cybersecurity experts said. Real-estate wire fraud hit 11,300 people in 2018, leading to more than $149 million in losses, according to data from the Federal Bureau of Investigation. That was up from 9,645 victims in 2017 who lost more than $56 million. “It’s been an absolute epidemic. No company, large or small, is immune, and neither are individuals,” said Melissa Krasnow, a partner at VLP Law Group LLP who specializes in data security and privacy. Large corporate data breaches could give cybercriminals more data to run targeted scams, she said. The Masuccis eventually learned that before the sale closed, their lawyer had forwarded the title company bogus mortgage payout instructions contained in a separate email, apparently sent by a hacker aiming to siphon money from the real-estate deal. On the day of the close, the title company transferred about $180,000, funds intended to pay off the mortgage, to the hacker’s bank account, said Gibraltar Bank Chief Financial Officer Linda Mourao. “The money never got to us,” Ms. Mourao said. “The title company should have known it was the wrong account.” “By the time we realized what happened, the money was long gone and the [hacker’s] account was closed,” Mr. Masucci said. “We were on the hook for $180,000.” Mr. Masucci said seven months of negotiations resulted in the title company agreeing to pay off the couple’s mortgage. The hacker was never caught. The Masuccis’ lawyer and title company couldn’t immediately be reached for comment. Businesses have also been victims of real-estate fraud. Thomas Cronkright, chief executive of Sun Title Agency LLC in Grand Rapids, Mich., said his company was scammed out of $180,000 during the 2015 sale of a gas station. The company recovered most of the money after working with law enforcement for two years, he said. Mr. Cronkright has since co-founded CertifID LLC, a software company focused on preventing wire fraud in real-estate deals. In June, 43 House lawmakers sent a letter to Federal Reserve Chairman Jerome Powell asking the central bank to explore policies to protect home buyers from wire fraud. Separately, Sen. Doug Jones (D., Ala.) in June teamed up with the American Land Title Association and other real-estate industry groups to launch the Coalition to Stop Real Estate Wire Fraud. The group plans to educate home buyers about such scams, starting with residents of Pittsburgh; Virginia Beach, Va.; and Birmingham, Ala.—three cities that have seen large increases in first-time homeownership. Mr. Jones said last month in a call with reporters that constituents in Alabama have been victims of such fraud, one losing $12,000 and another $250,000. Real-estate agent Richard Hopen was caught up in an email scam when he sold his own house in 2017. Hackers got away with $239,000 in that transaction, he said. He advocates laws to change the way wire transfers work. One solution he favors is to require banks to make sure the name of the person or organization intended to receive a wire transfer matches the name on the bank account. A mismatch, he said, would stop a wire transfer. The U.K. plans to require payment firms to do this starting next year. The House lawmakers cited the U.K. regulation in their letter to the Fed. “Most real estate professionals know of the problem, but they don’t understand how it occurs and how to prevent it,” Mr. Hopen said.

What you can and should be doing to prevent criminals from stealing real estate transaction funds. [This article was written by Jessica Davis and appeared in HousingWire, January 16, 2020] Twenty days after selling his house, Rich Hopen received an alert from his bank about the monthly mortgage payment for the house he no longer owned. Confused, Hopen called his mortgage lender to try and understand what happened – only to learn that the lender had never received his mortgage payoff. Instead, his $239,000 had been stolen by a criminal committing wire fraud. And if it could happen to Hopen, a Redfin real estate agent himself, it could happen to anyone. Wire fraud is an escalating problem for those in the real estate and mortgage space, and a category of crime that merits more attention. According to the Coalition to Stop Real Estate Wire Fraud, email phishing scams targeting real estate transactions increased by 1,100% between 2015 and 2017. Between 2017 and 2018, Federal Bureau of Investigation data shows a 166% increase in the amount of money lost due to real estate wire fraud in the United States – the FBI’s Internet Crime Report shows that 11,300 victims lost nearly $150 million in 2018 alone. That’s a lot of money, much of which was taken directly from borrowers who thought they were wiring over funds to secure their dream home and instead lost, in some cases, their entire life savings. The home-buying process is attractive to fraudsters due to the amount of money involved and the many parties included in the transaction. Relatively speaking, it doesn’t take much work for cyber criminals to profit off homebuyers. Whether criminals use email spoofing, phishing or account takeover, if they find one weak link among all the participants, they can make a great deal of money all at once. “I think that’s why this is going to become kind of a meaty and interesting subject for bad actors, because it only takes one account to get a really good payday,” said Kim Smathers, head of information security at Snapdocs. “You don’t have to go and breach a system. You’re breaching non-technical people. Notaries are not very technical; consumers are not very technical.” Cyber criminals use a few methods when conducting real estate wire fraud. In email spoofing, criminals mislead targets with emails that seem like they’re coming from a legitimate source – the notary, for example – falsely alerting the target of “new” or “changed” account information for the transfer of their funds. All the criminal has to do is make the email look legitimate enough to convince the homebuyer to send money to their account instead of the account originally indicated by the notary, and they capture a lot of money in one fell swoop. A criminal has the option to phish any participant in the mortgage transaction by emailing them bogus links that look legitimate but allow the criminal to capture the participant’s login information. If in one situation a real estate agent’s account is compromised, a criminal could log in and find all the information they need to convince buyers to transfer funds to their fraudulent account. The same situation could happen if a notary’s login credentials are compromised, with criminals potentially diverting the mortgage funds for a lot of people by breaching just one account. Who's talking about wire fraud? While the problem of wire fraud is growing exponentially, awareness of the issue is not, with few borrowers understanding the looming threat and how to protect themselves. The Coalition to Stop Real Estate Wire Fraud aims to combat that by educating homebuyers, real estate and mortgage professionals and legislators about the issue. “One of the drivers behind the coalition was, we’ve got to get everybody in the ecosystem talking about this,” said Mary O’Donnell, president of the American Land Title Association, which partners with the coalition. She said that sometimes, professionals and consumers in the early stages of a mortgage transaction may not be aware of wire fraud unless they know someone who’s been affected by it. However, while information and education for consumers and professionals is “absolutely critical” when it comes to preventing wire fraud, O’Donnell said the industry needs to go further than simply raising awareness of the issue. “Sometimes we talk about data privacy, but I do think what we need to focus on is data protection, which is actually slightly different. The consumer thinks about data privacy – privacy of their personal information – and that’s important,” she said. However, she explained that the industry has to look at how it operates and how the consumer is protecting their own data. There’s an overarching need for everyone involved in the transaction to assess how data is being protected. What preventative actions could help? The mortgage process encompasses one of the most important financial transactions of a consumer’s life and involves a lot of sensitive data – as well as large amounts of money changing hands. “The thing that bothers me the most is the lack of comprehensive controls from a governing body that you would expect to see around this,” Smathers said. “I think it’ll come but I just don’t think that it’s there yet.” She cited the Payment Card Industry Data Security Standard (PCI DSS) as a set of regulations that the mortgage industry could take as a model for its own financial transactions. The PCI DSS is a set of security standards with which all companies that accept, process, store or transmit credit card information are required to comply. Smathers explained that if there was a regulatory body with PCI-like requirements that said companies had to protect accounts with fraud protection and audited companies based on this, companies would have something to hand to a consumer or lender to prove that they were certified in managing their accounts and data for fraud. Smathers anticipates that this sort of regulation will come to pass “if there are enough complaints around this type of fraud,” noting that the regulation could be handled by the Consumer Financial Protection Bureau or added to the Gramm-Leach-Bliley Act. The act requires financial institutions to explain their information-sharing practices to their customers and to protect sensitive data. As part of the Federal Trade Commission’s implementation of this act, the commission issued the Safeguards rule, which requires financial institutions under its jurisdiction to have a written information security plan that describes their program to protect customer information. “The vendors that are going to be able to offer that [type of fraud protection] are the ones that are going to ultimately rise to the top,” Smathers added. Hopen said that any party involved in the sending or receiving of wire transfers should purchase and use two-factor authentication software to help verify that the wiring transfer instructions are correct and that the funds are set to be transferred to the right account. “Right now, the best practice is verification with phone calls and a back-and-forth to make sure you have the correct wiring instructions, but that is rife with so many problems,” he said. “Very few people do that, and they’re confused by it. But there’s software out there that allows you to do that.” O’Donnell said the coalition is working with regulators to see what can be done to protect consumer data and money. One tactic that the group thinks would be “enormously helpful,” she said, would be to implement payee matching on wire transfers at the financial institution level. With mandatory payee matching, financial institutions handling wire transfers would be required to check that the name given for the account matches the name associated with the account number. This practice would potentially stop fraudulent wires from going through, as the name on the fraudster’s account number would not match the name or institution associated with the legitimate wire transfer. O’Donnell said she has done quite a bit of work speaking with regulators and lobbying to have this become a mandatory practice. “This is a very simple fix that’s not required today by the Federal Reserve as part of the wiring process,” she said. “It wouldn’t eliminate [wire transfer fraud], but it would absolutely, we believe, reduce significantly the amount of these that actually go through.” Hopen also cited payee matching as an action that could have prevented his own wire fraud experience. “It’s absolutely crazy to me that a bank can accept the wire deposit and they don’t need to check the account number with the account holder. If that had happened in my situation, the money would not have been deposited in the wrong account.” He acknowledged that regulation and legislation are a big undertaking but said he believes change will happen faster once more parties are held professionally responsible for wire fraud taking place and face consequences as a result. “When a company or an industry starts being held liable, and there’s a financial cost to that, that will change behavior,” Hopen said. What are those in the industry currently doing to prevent wire fraud? In the meantime, there are methods by which companies are actively working to prevent wire fraud. Snapdocs is working with security experts to add fraud detection and account takeover prevention to its platform logon experience, Smathers said. Part of the fraud detection element would involve checking information from a user’s login session – including geolocation, IP address and the hardware signature of the phone or computer used – against a database that includes hardware signatures for devices that have been identified in previous fraudulent activity. On the title and settlement side, O’Donnell said that one of the ways some companies try to help consumers protect themselves is by using encrypted email protections to protect the flow of financial information and by including a consumer warning about security and fraud at the bottom of every email. Education for consumers and professionals remains critical as well. At the time of the wire transfer itself, title companies will send notices to the consumer and real estate agent to let them know that the company will not alert people of changes via email, O’Donnell said – a vital reminder, as so much of wire transfer fraud happens because people trust fraudulent emails without question. Companies urge their consumers and partners in the mortgage process to call and verify instructions verbally with people on staff. The importance of people picking up the phone to verify wire transfer information with their notary or title company could not be stressed enough, O’Donnell said. What can borrowers do to protect themselves? The Coalition advises borrowers to stay vigilant and protect their money during the buying process, recommending the following actions: Confirm wiring instructions by phone by calling a known number before transferring funds. Don’t follow phone numbers or links from an email. Be suspicious of any emails that include changes in wiring instructions and payment information, as title companies don’t usually communicate that information via email. When responding to an email, hit forward instead of reply, and type in the recipient’s email address. This can help clarify whether an email came from a fraudulent, spoofed source or the legitimate email address. Ask your bank to confirm the name on the account before sending a wire transfer. As soon as a wire transfer is sent, call the title company or real estate agent to verify that the funds have been received. The sooner a consumer detects that their money was sent to the wrong account, the better the odds are that the money can be recovered. In his list of best practices for wiring money, Hopen notes that home sellers whose mortgage is being paid off should call their mortgage lender immediately after closing to confirm the mortgage payoff was received. Hopen added that in the situation that the money was wired into a fraudulent account, the following actions should be taken immediately: Report the fraudulent wire transfer to the sending and receiving banks. Contact the sending bank’s fraud department and initiate a swift recall on the wire. Request a recall of the wire be sent to the receiving bank. Provide the wiring details and ask the bank to alert all other banks that may have received your funds to place a fraud alert or security hold on the funds so they’re not withdrawn or transferred to another account. Request the bank initiate the FBI’s Financial Fraud Kill Chain. Report any fraudulent activity to the FBI via its Internet Crime Complaint Center – www.ic3.gov and call your local FBI field office to assist in the recovery of your funds. Inform all parties in the transaction of the fraud, including the title insurance carrier. Hopen said he is “continually astounded that this issue isn’t front and center” in all discussions between real estate professionals and their clients. As a result of his own experience with wire fraud, he now takes the time to explain wire fraud and how to prevent it in every consultation he has with a seller or homebuyer. “That conversation should happen in every single transaction until the problem is addressed with technology or changing regulation,” he said.

Shortly after I joined a residential real estate firm, I had breakfast with a friend whom I had not seen in over three years. We both used to be commercial real estate brokers. When I last saw Doug, I was at the top of my game. In 2012, my brokerage firm won a prestigious award. I closed one of the largest office lease transactions in NYC and Tampa. I made a lot of money. I remember going to the bank to deposit a seven figure check into my personal account and thinking balloons and confetti would drop from the ceiling. Instead the bank teller said without any expression, “Is there is anything else?” I responded, “Nope. That’s all I got.” That was in 2012. Compare that moment to this one in 2016. I was struggling to get a new business off the ground and needed to bring in some cash. Uber had just launched in New Jersey and I tried being a driver. I was in New Jersey and drove a customer into NYC. It was a long drive and I had consumed a large bottle of water. After dropping off my customer I was on a frantic mission to find a bathroom. I double parked illegally in front an office building on Avenue of the Americas and as I was closing my car door, a razor sharp corner of the door sliced open my elbow. I was bleeding profusely on the sidewalk. People looked away and avoided walking near me. I could only think of one thing. I better find a bathroom quick or else I’ll be covered in blood and piss! I found a bathroom and a security guard bandaged my elbow. I often juxtapose those two moments - depositing a fat check at the bank and bleeding on the sidewalk in NYC. During breakfast when I told Doug about my new position in residential real estate, he laughed and asked me, “Do they know who you are?” I said, “Yes, I’m a beginner.”