Zelle Operator Hit with Fraud Suit

New York – The New York Attorney General, Letitia James, has filed a lawsuit against Early Warning Services, LLC (EWS), the operator of the electronic payment platform Zelle, for failing to protect its users from massive fraud over several years. An investigation by the Office of the Attorney General (OAG) revealed that EWS designed Zelle without critical security features, allowing scammers to easily target users and steal over $1 billion between 2017 and 2023. Despite knowing from the outset that several features of the Zelle network made it particularly susceptible to fraud, EWS did not adopt basic security measures to address these flagrant flaws nor impose significant anti-fraud rules on its associated banks.

Fiscal General James filed this lawsuit after the Consumer Financial Protection Bureau (CFPB) filed a similar lawsuit in December 2024 and later dropped the case after a change in federal administration. With this suit, Fiscal General James seeks restitution and damages for New Yorkers affected, as well as a court order requiring Zelle to maintain necessary anti-fraud measures to protect its users.

“No one should be left out in the cold after being victimized by a scam, and I hope justice is served for New Yorkers who suffered from the security failures of Zelle,” declared Fiscal General James.

EWS is a financial technology company owned by a group of the largest banks in the country, including JPMorgan Chase, Bank of America, Capital One, and Wells Fargo. These banks tasked EWS with launching an electronic payment platform to compete with payment apps like Venmo, PayPal, and CashApp, which were not controlled by the banks. In their rush to launch the platform, EWS prioritized attracting new customers through an easy and simple registration process and fast transfers, at the same time leaving consumers vulnerable to scammers.

Since Zelle’s launch in 2017, anyone with a US bank account could register and send or receive near-instantaneous money transfers via email addresses linked or mobile phone numbers. Scammers could register through a quick registration process that lacked important verification steps and use fraudulent email addresses associated with reliable companies or government entities. The emphasis of Zelle on immediate and irreversible transfers means that by the time consumers realize they have been scammed, their money often has already disappeared.

As a result, Zelle quickly became a hub for fraudulent activity. The most common scams involved scammers gaining access to users’ accounts and making unauthorized transfers, and scammers convincing users to send funds under false pretenses, such as offering non-existent goods or services or posing as a legitimate entity.