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Cyber Risks · Krebs on Security

Firm Bankrupted by Cyberheist Sues Bank

Summary: A California escrow firm forced out of business after a $1.5 million cyberheist is suing its former bank, First Foundation Bank, alleging its security procedures were not commercially reasonable and that it failed to act in good faith when it processed three fraudulent international wire transfers totaling $1,558,439 between December 2012 and February 2013. The heist began with a $432,215 wire to a bank in Moscow, followed by two wires totaling $1.1 million to Heilongjiang Province in China; the Russia wire was recovered, but the $1.1 million was gone, and state regulators shut the firm down three days after it reported the loss.

Key Takeaway: Under the Uniform Commercial Code, a payment order is effective even if unauthorized when the bank's security procedure is commercially reasonable and followed in good faith, so a business victim has no consumer-style protection and must sue to recover; the plaintiffs allege the bank's 32-second token requirement had failed and was simply disabled for the customer rather than fixed.

Read the original at Krebs on Security ↗

Topics
Data Breaches
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