Litigation Over Impostor Email Fraud Mounting in Florida

WEST PALM BEACH, Fla. (CN) – Plaintiffs in a string of lawsuits filed across South Florida want Wells Fargo and Bank of America held liable for allegedly failing to stop email-impersonation scams used by crooks to steal wire transfers in real estate deals and commercial sales.

The plaintiffs claim the banks should promptly reimburse them for money they lost when wire transfers for their real estate deals and commercial sales were diverted by thieves, who used fraudulent emails to impersonate attorneys, closing agents, and counterparties involved in the transactions.

The influx of litigation indicates that this type of impostor email scam remained prevalent in South Florida through the summer of 2017.

Among the lawsuits is an Oct. 5 complaint filed by plaintiff Christopher Schuman. He claims a thief, posing as his attorney for a South Florida property purchase, contacted him via email and duped him and his private banker at Wells Fargo into wiring a  $585,000 down payment into a Bank of America account, controlled by the fraudster or his associates.

The Wells Fargo banker processed the wire for Schuman remotely in early July 2017. The banker received the wire instructions directly from a fraudulent email purporting to be from Schuman’s attorney, according to the complaint.

Schuman says before he realized what was transpiring, the impostor tried to bilk him out of another $254,000, telling him to wire over that sum as the remaining down payment amount.

Schuman says that luckily, he contacted his attorney by phone to discuss the transaction. The attorney denied knowing about either wire request, and at that point, Schuman discovered he had been the victim of a con artist, he says.

A $300,000 chunk of the stolen $585,000 was frozen by bank representatives, but the crook(s) managed to siphon off $285,000 “to a location in South Africa,” Schuman says.

Schuman claims Wells Fargo was aware of these types of schemes but had “ineffective fraud prevention practices” in place to prevent them. His lawsuit alleges Wells Fargo could have readily thwarted the fraud by calling up the intended wire recipient prior to executing the transfer, or by contacting Bank of America to make sure the receiving account was authentic.

Schuman demands damages from Bank of America as well, alleging that the bank failed to follow customer identification protocols, and neglected to investigate the transfer to South Africa “despite knowledge of widespread international fraudulent banking activities” originating from the country.

On the heels of Schuman’s lawsuit, a similar civil action against Bank of America popped up in Palm Beach County court.

That action alleges that plaintiff Donn Sanders was bilked out of his $17,000 payment towards a local property purchase, after he was given fraudulent wire instructions in June 2017. A thief had given him the wire instructions through a scam email that impersonated a title company agent involved the transaction.

Sanders claims Bank of America “failed to perform the simplest safety check: match the named recipient of the subject wire transfer with the named recipient’s account.”

The wire was allowed to proceed even though the destination account was a personal account, as opposed to a title company account, according to the complaint.

Sanders is seeking damages from Bank of America and Smoky Mountain Title, as well as a real estate agency and mortgage financier tied to the transaction.

The Courthouse News database indicates that lawsuits from alleged victims of email-impersonation scams have been filed with increasing frequency in Southeast Florida year-over-year between 2015 and 2017.

While local real estate deals appear to be a frequent target of  the scams, small business owners and even the airline industry have been affected as well, according to court documents.

In another Broward case, plaintiff Fly Allways, a Suriname-based airline, alleged its money for an aircraft purchase — more than $660,000 — was nabbed by a crook or criminal ring who used scam emails to pose as a title company agent.

Meanwhile, in Palm Beach court, a supplier claimed it was conned out of $65,000 proceeds from a bulk candy sale, after a thief contacted the buyer by email and gave bogus wire instructions while posing as the supplier.

The buyer ended up wiring the money for the purchase from its PNC Bank account to a Wells Fargo account that, unbeknownst to the buyer, was controlled by the fraudster(s). Both banks are named as defendants in the litigation.

Generally, when plaintiffs in this wave of  Florida lawsuits have filed for an injunction to recover funds frozen due to fraudulent wires, banks have appeared willing to release the money and initiate interpleader proceedings.

But when funds are withdrawn or transferred out of the country by the alleged fraudsters, counts for damages against a bank tend to arise, and the plaintiffs road to recovering their purportedly stolen money becomes mired in extended litigation.

In the case of the allegedly stolen bulk-candy-sale proceeds, Wells Fargo has argued that it had no obligation to verify the legitimacy of all the info on the incoming wire.

Such wires are often processed automatically, and, under the applicable Uniform Commercial Code, a bank receiving a wire transfer need only rely on the account number given, unless a bank employee has “actual knowledge” that the name on the transfer doesn’t match the recipient account, Wells Fargo argues.  Wells Fargo has moved to have the plaintiff’s sole count against it — for UCC violations — dismissed on those grounds.

In response to an inquiry from Courthouse News, Bank of America explained that typically, once a sender authorizes a transfer, the receiving bank will simply credit the amount specified by the remitting bank.

“We don’t like to see anyone’s customers–including our own–become victims of email scams,” Bank of America’s public relations department said. “We try to work with victims and other banks to return the funds when feasible, but this is not always possible.”

A communications consultant in Wells Fargo’s Corporate Risk and Technology division declined to comment on Schuman’s litigation over the diverted $585,000 property down payment.

She said, however, that “the security of our customers’ accounts and information is our priority,” and that the bank takes “a proactive approach using evolving technology to meet the challenge posed by ever-changing threats.”

“We encourage customers to be vigilant with their accounts utilizing cybersecurity safeguards and if they suspect a phishing or email scam to contact us immediately,” the Wells Fargo representative stated.

The FBI estimates that impostor email scams and related acts of fraud caused $5 billion in losses between Oct. 2013 and Dec. 2016. Included in the tally are wide-ranging types of business email scams, including executive impersonation, where a criminal poses as a company higher-up and sends out fraudulent payment instructions to employees.

The FBI says that it “saw a 480 percent increase in the number of complaints in 2016 filed by title companies” targeted by impostor email scams.

The U.S. Treasury’s Financial Crimes Enforcement Network issued an alert in Sept. 2016, warning financial institutions of “billions of dollars in possible losses” attributable to impostor email scams, and enumerating red flags to identify the scams.

%d bloggers like this: