Wire Fraud Alert

Recently we have been seeing and hearing about a proliferation of fraudulent scams. Sadly, this is almost certainly the result of more (indeed nearly all) people working from home these days. I’ll explain the two frauds we have witnessed below but if you take one thing away, it is to always independently verify wire requests before sending any money to anyone. For example, rather than calling a phone number that is in a suspect email, lookup the individual or company and call them directly to verify that the situation is legitimate.

In the first instance, which happened to one of our clients, a fraudulent third-party hacked into someone’s email and began to monitor email traffic. When a customer of our client inquired about paying an invoice, the third-party, using a fake domain name (that was one letter off so that it looked like the right domain name), interjected themselves into the conversation and responded to the customer (by impersonating an individual at our client) that the customer should wire payment for the invoice rather than sending a check. The customer then, unfortunately, “paid” our client a significant sum of money by wiring the funds to the fraudulent party’s bank account. The customer never realized that they were not communicating with our client. Had the customer simply picked up the phone and called my client (using her phone number on the Internet or in their personal database (and not the one listed in the email, which was false) they would have immediately learned that the request to wire the funds was a fraud. There were other red flags they missed as well, such as the domain name being slightly off, the fact that the bank they were to wire funds to was in Texas while our client was in California etc., but regardless, a simple verification call would have protected against this situation.

In the second instance, which happened to our firm, an individual contacted us saying they has been referred to us by the San Francisco Bar Association and that they needed assistance with a purchase agreement. They signed our Retainer Agreement and provided us with a detailed Letter of Intent on the deal for review. Then, rather than send in the retainer fee, they, unexpectedly, sent us a very large cashier’s check allegedly drawn on a large national bank and asked us to deposit it as part of the purchase price, take our retainer fee, and remit the balance to the seller. After reviewing the domain names and communications and noticing some irregularities in the email addresses (extra letters in names, gmails rather than company domain names for some of the emails etc.) we contacted the buyer and seller in the transaction by looking up their information independently and confirmed that while they were indeed real companies they were not involved in the deal. It was all a fraud and the individuals who had contacted us were impersonating both the buyer and the seller. The “cashier’s check”, which looked completely real, was a fake and they were hoping that we would deposit it and wire funds out before learning that the check bounced.

Our bank confirmed that they also are seeing a spike in wire fraud. They feel that this is because of the dramatic increase in people working from home and who therefore are unable to easily talk in person with people they work with to easily verify wire requests.

During this time of people working from home, please take extra precautions before wiring funds out to confirm that the communications are legitimate.The scam artists are relying on people using email or text only to communicate and hoping that you don’t go the extra step and give someone a call.

Scherer Smith & Kenny LLP remains available to guide you through these issues. For additional information, please contact Brandon Smith at bds@sfcounsel.com or Heather Sapp at hgs@sfcounsel.com.

– Written by Brandon Smith