Wednesday, July 05, 2017

Lawsuit: Scammers Hack Into Non-Secure Email, Then Use Spoof Account To Hijack $272K In Real Estate Closing Funds, Leaving Victimized Homeowner-Couple Without Their Home & Their Money

In Denver, Colorado, KMGH-TV Channel 7 reports:
  • A Colorado couple, who lost their life savings while trying to buy their dream retirement home, has filed suit against Wells Fargo Bank, Land Title Guarantee Co., Envoy Mortgage Ltd., Kentwood Real Estate Services LLC and realtor Karen Porras, alleging that none of them did enough to protect sensitive financial information.

    James and Candace Butcher sold their house in Longmont and were using the proceeds -- more than $272,000 -- as a down payment on a new home, at 41467 Sunny Farm Circle in Parker.

    They said they wanted a place closer to their son and one big enough for grandchildren.

    “We were truly excited, when through negotiations, we won the bid,” Candace Butcher said. “Through the entire process, I kept saying, ‘I can’t believe this is going to be our house.’”

    Within 24 hours of closing, not only was it not their house, but they lost all their money.

    Butcher told Denver7 that she got a phone call from Wells Fargo the following day alluding to problems.

    “They never said up front that it was fraud,” Mrs. Butcher said. “They said, ‘we’re trying to check into it.’”

    “I was sick,” she added. “That was our life savings, the equity that we had built up in our home.”

    Allegations

    The complaint filed in Denver District Court outlines the couple’s allegations.

    They say that during the negotiation, inspection and closing process, the defendants routinely sent sensitive financial information through non-secure email, violating their own and industry guidelines.

    On March 30, Ms. Porras emailed the Butchers and notified them that they would be receiving wiring instructions from Shannon at Land Title prior to closing, which was then scheduled for April 5, 2017.

    On April 3, the couple received an email at 7:49 a.m. and 8:37 a.m. from someone identified as Shannon Ryon at Land Title, requesting that they wire $272,535.96 cash to close, and requested that they reply to the email to confirm receipt.

    The email did not identify the domain name of the receiver.

    At 9:04 a.m., Ashley Johnson of Envoy emailed the Butchers a “final” closing disclosure, which stated that the couple would need to wire funds in the amount of $272,535.96 to close on the property.

    The dollar amount had never been discussed, nor disclosed until the Butchers received emails, with identical numbers, from a Shannon Ryon and from Ashley Johnson.

    The couple’s attorney, Ian Hicks, says it appears that someone hacked into one of the companies’ servers and retrieved financial information and then sent a bogus email to the homebuyers.
    ***
    The Butchers told Denver7 that they went to the Wells Fargo Smoky Hill branch and spoke with a personal banker, who then contacted the fraud department. The personal banker apparently informed the couple that she was unable to get any status on the wire transfer, or any investigation by Wells Fargo, even though that it was Kelly Vance at Wells Fargo who allegedly first contacted the Butchers, to inform them the wire transfer was fraudulent.

    Hicks said the Butchers asked to speak to the branch manager, Lyndsey Dehate, and said she opened a case and provided the Butchers with a reference number, and further indicated that an investigator, as well as the legal and wire fraud groups at Wells Fargo, were involved.

    After spending hours at the branch, the couple went home.

    On April 5, the Butchers called the branch and asked Ms. Dehate if she had contacted the FBI.

    The complaint quotes Dehate as saying “Wells Fargo has a policy of not contacting the FBI in situations like this.”

    Hicks told Denver7 that neither Dehate, nor anyone at Wells Fargo, ever informed the Butchers that the FBI can initiate what is known as a “Financial Fraud Kill Chain,” where the FBI can stop a wire transfer and return the funds to a U.S. victim’s bank account within 72 hours.

    James Butcher called the FBI and then, with an agent on the line, contacted Wells Fargo.

    “They were shuttled from one department to another,” Hicks said. “Wells Fargo couldn’t provide basic information… and repeatedly contradicted itself.”

    “They said there was an investigation and then they said there was not,” he said. “They said they had a number assigned to the case and then said they couldn’t see it. It’s unbelievable.”

    Risks known for years

    Hicks said the defendants are all aware that scammers have been stealing money via wire fraud.
    ***
    Bank offers money

    Hicks said Wells Fargo offered to return some of the couple’s money, if they relieved them of liability.

    “I rejected that offer,” Hicks said.

    James Butcher said, “It concerns me that they couldn’t come forward and share with us exactly how much. It could very well be a large sum of money, and I don’t know, or it could very well be a small amount of money. I can’t afford that.”

    Future up in the air

    On April 7, an Envoy representative called the Butchers and asked if they still planned to close on the property. The couple informed her that it was unlikely.

    According to the complaint, that Envoy representative informed the Butchers that a similar scam had just been attempted but prevented because Envoy was no longer dealing with wire transfers, only cashier’s checks.

    That’s bittersweet news to the Butchers, who are now living in their son’s basement.

    “We don’t even have a down payment to go buy another home,” Candace said, “so what do we do from here? Are we going to move back into an apartment?”

    [...]

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