New York State has filed a lawsuit against Early Warning Services, LLC, the company behind Zelle, accusing it of facilitating widespread fraud on the platform. The Attorney General's office claims that EWS designed Zelle without essential safety features that could prevent scams, resulting in over $1 billion in losses. The platform's design and rapid payment system left victims with limited options for recovering stolen funds. The lawsuit seeks restitution for New York residents defrauded between 2017 and 2023.
EWS designed Zelle without critical safety features, allowing scammers to easily target users and steal over $1 billion. Zelle allegedly lacked important verification steps during registration that allowed users to sign up with accounts that closely mimicked known brands.
Because Zelle was designed to facilitate rapid payments, fraud victims were left with little in the way of restitution. Banks would typically tell victims that there was no way to retrieve stolen funds.
When Zelle launched, EWS did not require participating banks to report scams. Even when the company received fraud reports, it rarely removed fraudsters' accounts with any timeliness.
Even when the company developed safeguards, it ultimately failed to adopt them, exposing consumers to ongoing fraud risk.
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