New York Attorney General Leticia James will speak at the Supreme Court of New York ahead of the civil business fraud trial of former President Donald Trump held in New York on October 2, 2023.
John Runpulsky | AFP | Getty Images
New York Attorney General Letitia James sued the operator of the Zelle Payments Network on Wednesday, which allegedly made fraud possible months after the Consumer Financial Protection Agency dismissed a similar lawsuit.
Early Warning Service is the owner and designer of a peer-to-peer remittance company. An investigation by the Attorney General’s office found that Zelle, whose company said it allowed fraudsters to steal more than $1 billion from users between 2017 and 2023, designed it “without any critical safety features.”
“EWS knew from the beginning that key features of the Zelle network made the impact of fraud unique, but it did not adopt basic safeguards to address these obvious flaws or enforce meaningful anti-FRAUD rules on partner banks,” a statement from the office read.
The lawsuit alleged that Zelle became a “hub of fraud” because there was no verification action in the registration process and that EWS and its partner banks had known “for many years” that fraud was spreading and that no viable steps were taken to resolve it.
James is seeking compensation and damages for the suit, in addition to a court order that requires Zell to introduce anti-combust measures.
“No one should dodge for himself after he is a victim of fraud,” James said in a statement. “We look forward to getting justice for New Yorkers who suffered due to Zell’s security failure.”
The lawsuit follows a similar lawsuit dismissed by the CFPB in March. The CFPB sued three US banks that control Zelle’s transactions, EWS, JPMorgan Chase, Bank of America and Wells Fargo.
Regulators have dismissed the lawsuit on bias amid growing numbers of reduced cases under CFPB Director Russell Vert. CNBC previously reported that the agency had agreed not to bring these claims back.
