NY Attorney General Files Suit Alleging ‘Massive Amounts’ of Fraud on Zelle

NEW YORK – New York Attorney General Letitia James has sued Early Warning Services, LLC (EWS), the operator of the payments platform Zelle, alleging it has failed to protect its users from “massive amounts” of fraud.

The company is owned and controlled by a group of the largest banks in the United States.

“An investigation by the Office of the Attorney General (OAG) revealed that EWS designed Zelle without critical safety features, allowing scammers to easily target users and steal over $1 billion between 2017 and 2023,” James’ office said in a statement. “EWS knew from the beginning that key features of the Zelle network made it uniquely susceptible to fraud, and yet it failed to adopt basic safeguards to address these glaring flaws or enforce any meaningful anti-fraud rules on its partner banks.”

Move Follows CFPB’s Withdrawal

James said her office filed the lawsuit after the Consumer Financial Protection Bureau (CFPB) abandoned a similar lawsuit, filed in December 2024, following the change in the federal administration. With the lawsuit, James said she is seeking restitution and damages for affected New Yorkers, as well as a court order mandating Zelle maintain anti-fraud measures necessary to protect its users.

“No one should be left to fend for themselves after falling victim to a scam,” James said in a statement. “I look forward to getting justice for the New Yorkers who suffered because of Zelle’s security failures.”

Misleading Ads

In addition, James alleged Zelle’s advertisements misleadingly promised safe and secure money transfers. “In reality, Zelle failed to adopt basic anti-fraud safeguards,” the attorney general’s office stated.

“Beginning in 2017, the year Zelle launched, anyone with a U.S. bank account could enroll in Zelle and send or receive near-instant money transfers through linked email addresses or U.S.-based mobile phone numbers,” the AG continued. “Scammers could sign up through a quick registration process that lacked important verification steps, allowing them to utilize misleading email addresses such as those associated with trusted businesses or government entities. Zelle’s emphasis on immediate and irreversible transfers means that by the time consumers realize they have been targeted by fraudsters, their money is often already gone.

“As a result, Zelle quickly became a hub for fraudulent activity,” the statement continued. “The most common scams involved fraudsters gaining access to users’ accounts and making unauthorized transfers, and scammers convincing users to send funds under false pretenses, for example by offering non-existent goods or services or by impersonating a trusted institution like a bank or government office.”

‘Knew for Years’

The OAG said the investigation revealed that EWS and its partner banks knew for years that fraud was spreading on Zelle and  failed to take meaningful action to stop it. 

“When participating banks received complaints from Zelle users about fraud, EWS allowed banks to report that fraud to EWS long after it occurred, which enabled bad actors to scam additional consumers,” the AG said. “Even when EWS did receive reports of fraud, it failed to promptly remove the fraudsters from the Zelle network or require banks to reimburse consumers for certain scams. EWS developed basic safeguards to address these issues as early as 2019, but failed to adopt them.”