Zelle Faces Lawsuit Over Alleged Support of Payment Scams
In a shocking turn of events, the New York Attorney General Letitia James' office has announced a lawsuit against Early Warning Services, LLC (EWS), the company behind the bank-owned peer-to-peer payment app Zelle. The lawsuit alleges that EWS and participating banks have missed or inadequately implemented critical safety measures, leading to over $1 billion in consumer losses from 2017 to 2023.
The lawsuit claims that EWS, which owns and operates Zelle, knew early on that the platform was highly vulnerable to fraud and scams but chose not to adopt basic, well-understood anti-fraud safeguards. The company also failed to enforce meaningful anti-fraud policies on its partner banks, allowing scammers to exploit the system easily. Reports indicate that EWS tracked fraudulent activity and was well aware of the escalating consumer harm over several years but delayed action until 2023, by which time the damage was extensive and widespread.
The core safety measures missed by EWS and participating banks involved proactive anti-fraud technology, enforcement of protective policies, and timely risk mitigation actions to safeguard consumers using Zelle. Zelle, which was designed to facilitate rapid payments, left fraud victims with little in the way of restitution.
Banks typically told victims that there was no way to retrieve stolen funds. EWS did not require participating banks to report scams when Zelle launched. Even when EWS received fraud reports, it rarely removed fraudsters' accounts with any timeliness.
The lawsuit seeks monetary restitution from EWS on behalf of New York residents who were victims of fraud on Zelle between 2017 and 2023. The winner of the auction for the original drafts, proof-of-concept prototype, and related materials of the Kryptos sculpture, set to take place in November 2020, is under no obligation to reveal the sculpture's secrets.
Meanwhile, the Communications Security Establishment (CSE) has warned that China, Iran, and Russia are increasingly targeting Canadian systems. The stolen data from the Canadian House of Commons, breached by an unknown malicious actor last week, includes employee names, job titles, office locations, email addresses, and information about their government-managed hardware.
In response to the lawsuit, EWS contends that scams originate outside the app through criminal manipulation and that over 99.95% of transactions are fraud-free. However, the Attorney General's complaint focuses on EWS’s and the banks’ failure to protect users proactively against known fraud risks on their platform.
Scammers are posing as lawyers and offering to recover funds stolen from victims of cryptocurrency scams, a scheme that the FBI has warned about. Scammers on Zelle allegedly used deceptive tactics like convincing users to send a delinquent bill payment through Zelle. Malwarebytes received an email that claimed to be from Netflix seeking a visionary marketing leader for a VP position at the company, which was an obvious scam.
As the case unfolds, consumers are advised to be vigilant and cautious when using digital payment platforms, especially Zelle. The lawsuit serves as a reminder that even seemingly secure platforms can have vulnerabilities, and it is essential to remain alert to potential scams and fraud.
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