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Investing.com -- New York Attorney General Letitia James filed a lawsuit Wednesday against Early Warning Services, LLC (EWS), the operator of payment platform Zelle, for allegedly failing to protect users from fraud that resulted in over $1 billion in losses between 2017 and 2023.
EWS, owned by major U.S. banks including JPMorgan Chase, Bank of America, Capital One, and Wells Fargo, allegedly designed Zelle without critical safety features, making it easy for scammers to target users.
"No one should be left to fend for themselves after falling victim to a scam," said Attorney General James. "I look forward to getting justice for the New Yorkers who suffered because of Zelle’s security failures."
The lawsuit comes after the Consumer Financial Protection Bureau abandoned a similar case filed in December 2024 following the change in federal administration.
According to the investigation, EWS prioritized rapid growth over security when launching Zelle in 2017 to compete with apps like Venmo, PayPal, and CashApp. The platform’s quick registration process lacked proper verification steps, allowing scammers to create accounts with misleading email addresses resembling trusted businesses or government entities.
The immediate and irreversible nature of Zelle transfers meant consumers often discovered fraud too late to recover their money. Common scams included unauthorized transfers and fraudsters convincing users to send money under false pretenses.
In one example cited in the lawsuit, a New York resident lost $1,476.89 after transferring money to a Zelle account named "Coned Billing" when a scammer impersonated a Con Edison employee and threatened to cut off electricity service.
The investigation revealed EWS and partner banks were aware of widespread fraud but failed to implement meaningful safeguards. The company allegedly developed basic protections as early as 2019 but did not adopt them, and failed to enforce even limited anti-fraud rules against participating banks.
Attorney General James is seeking restitution and damages for affected New Yorkers, along with court orders requiring EWS to maintain necessary anti-fraud measures to protect users.
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