Zelle Operator Hit with $1B Fraud Suit

New York – The Attorney General of New York, 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 a billion dollars between 2017 and 2023.

EWS was aware from the outset that various characteristics of the Zelle network made it particularly susceptible to fraud; however, for years, it did not adopt basic security measures to address these flagrant flaws nor impose significant anti-fraud rules on its affiliated banks. Attorney General James filed this lawsuit after the Consumer Financial Protection Bureau (CFPB) filed a similar lawsuit in December 2024 and subsequently dropped the case after a change in federal administration. With this lawsuit, Attorney 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 at their own mercy after falling victim to a scam, and I hope justice is done for the New Yorkers who suffered from the security failures of Zelle,” declared Attorney 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 apps like Venmo, PayPal, and CashApp, which were not controlled by the banks. In its rush to launch its platform, EWS prioritized attracting new customers through a simple registration process and fast transfers, leaving consumers vulnerable to scammers.

The ads for Zelle promised securely transferring money. In reality, Zelle did not adopt basic fraud protection measures.

Starting from 2017, when Zelle was launched, anyone with a U.S. bank account could register and send or receive almost instant money transfers through email addresses linked or mobile phone numbers in the United States. Scammers could register through a fast registration process that lacked important verification steps and use deceptive email addresses, such as those 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 has often 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, as well as scammers convincing users to send funds through deceit, such as offering non-existent goods or services or posing as a legitimate entity.

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