WARNING!! and help please

44 Replies

I recently became victim to a complex real estate wire fraud scandal. I am writing this first of and foremost to get the word out there so no-one else follows in my footsteps. At the same time, if anyone has any suggestions of what I can do at this point please steer me a the right direction.

I live in the state of California and three weeks ago I was purchasing a home in the state of Georgia. According the law enforcement, my Real estate agents email (unsecured Gmail account) had been compromised prior to our escrow. During the closing period, a scam artist initiated contact with the closing Attorney and identified themselves as me.

Once they had created a communication thread with the closing they were then able to subsequently email me and act as if they were the closing attorney. They were able to appear very professional and answer all of the correct "lingo" because they were simply copy and pasting the words and acting as an "intermediary" back and forth. I therefore never had any "real" communication with the closing attorney because I was just replying to their initial email. The scam artist simply took everyones email address, and changed it by one letter.

When the closing attorney sent the wire instructions, they were manipulated and the checking and routing numbers were changed to a fraudulent account. Unfortunately, I lost a great deal of money on this scam. The FBI just let me know I have no chance of getting my money back due to the funds changing hands thru so many "mules" almost instantly. 

At this point both my agent and closing attorney have been supportive, but take absolutely no fault in their actions. My agents email was the only one that was hacked, and the closing attorney was the first one who took the bait, and never had any real communication with me.

Please be warned of this scam and never do any important transactions with industry professionals who do not use a secured source communication. In addition, alway ensure you pick up the phone and repeat account numbers with closing attorney/title company. If anyone has ANY suggestions of what I can do civilly, etc, please contact me. I have talked with a few attorneys, but none of the have any experience with this type of fraud. Is it business malpractice, litigation, wire fraud, they all say this is beyond their "scope."

Be aware, and please help

Thanks,

Justin

Thanks for the story. Unfortunately, I think you are screwed. You had a responsibility of due diligence that would include independent confirmation of what you were receiving by e-mail. At a minimum, you should have considered having a local attorney attend the closing on your behalf and deliver a certified check in hand.

E-mail is great for getting things set up but I would never move any kind of money that way, and especially not from an e-mailed wire instruction sheet. Trust but verify. 

I appreciate your input. I did hire a local attorney, who acts in position of a title company in the state of GA. This is someone that you pay to ensure a transaction goes smoothly, but in my case that wasnt the situation.

Believe me that due diligence was done by me. I even flew to the area during escrow to see it first hand, and meet my team face to face. This was a well educated criminal who fooled my attorney, and impressed the FBI with their scheme.

This has gotten to be quite a common. Due to the nature of these crimes and the fact that many times the money goes overseas, there is -0- chance of recovery. This is why everyone needs to phone the other party and verify wiring instructions. There are more and more victims everyday. 

@JD Martin

We have many title companies that will not accept cashiers checks due to the number of fraudulent checks. Some will ONLY accept wired funds. The crooks are always scheming to steal money any way possible. 

I would like to know if your real estate agent had any malware protection on his computer, what level of operation system (windows 10 etc.) and what or when he found out his computer was hacked? What he was told to do to keep from getting hacked again. This will also help the next person from getting scam. What are the steps to get a secured g-mail account? Just trying to help the next person.  

The agent did not know they were hacked untill after all the pieces were put together, after funds were transferred. A secure email can be had thru a private business server, above my level, but many title companies and banks use them for this exact reason. Also, many important documents should be shared on secured sites utilizing portals. I dont know internet security practices myself, but industry professionals need to safeguard their clients and themselves, especially since this fraudulent scam is gaining popularity.

Yes Bryan that is exactly what happened. I have not talked to their emmisions insurance. I believe agents dont have it, but their brokers do, along with the closing attorney. I did ask them if we could make a claim against their insurance, but they feel they are not at any fault, and I am the sole victim.

I believe my only other course of action is litigation. Trying to find someone with experience in this has been tough.

@Justin R. this is very common. Before you wire any money it's always best to call someone to verify. I am surprised your agent did not warn you about this scam at the start of the transaction. 

Hope you are able to get things worked out.

@JD Martin   most closing companies will no longer accept cashiers checks or personal checks greater than 10k.. since there was a lot of forged cashiers checks going around.

OP.

My SOPs are as follows..

1. I always send my wire instructions via fed ex... I have them all printed out for my various companies.  when I set up with a new closer IE I am going to do 20 to 50 deals in a year with them.. I send them VIA fed ex my wire instructions..

2. once they have them then verbal conference that they are correct.

3. I ONLY accept wired funds from closing attornies I will NOT accept their company checks many of these one man shops are simply to small and there are rotten attorneys that pilfer clients dough.. So I want collectable funds on the spot.

its a major issue right now  sorry this happened to you... Also I go to my bank daily and personally do my outbound wires... ( the advantages of community banks) I have my personal banker.. I call them in in the morning and then go sign mid day.. I do this daily... this also double check of where the funds are going.. because we send so many wires a week.. ( many times over 25) its a process.

This absolutely sucks, I'm sorry to hear about it, and sadly it seems to be increasingly common. Here's the warning on the wire transfer instructions from the last deal I did: "***DUE TO THE POSSIBILITY OF FRAUDULENT INTERCEPTION OF ELECTRONIC COMMUNICATION, WE RECOMMEND YOU VERBALLY VERIFY WIRE INSTRUCTIONS WITH OUR OFFICE BEFORE INITIATING WIRED FUNDS." All caps are theirs, and for good reason.

@Justin R. of course they don't feel like it's their fault, and their premium stands to go up if a claim is filed. It doesn't really matter what they feel. Your email wasn't compromised, your agents was. If he did not exercise reasonable care to protect his client's financial interests by having a strong password or protecting the computer that he used to process your information and do his business then that is his fault.

@Bryan O. I have to agree with Bryan, you should have verified the person requesting the wire however they should have used a secure email server. The fault is in both courts, but the one most at fault is the agent and their company. I would talk to a lawyer if it's a good amount of money.

Moving forward, call to verify.

@Justin R.

So I'm going to give you my advice but first I'll share my experience.  I almost got scammed by a con man a few years ago.  I stood to lose 350k but was able to recover it.  However it cost me 100k in attorney fees.  So believe me I understand where your coming from.  I also got a sick satisfaction that he went to prison.  You will not have that enjoyment unfortunately. 

 That being said I don't think you have a case because you were defrauded by a ghost.  So there's nobody to go after.  Errors & omission insurance specifically excludes fraud.  When you try to sue an insurance company they are well funded & can hire some of the best attorney out there.  

So after all the dust settles & you go through all of the emotions (anger, blame etc) you will come to a crossroads.  Do I continue to invest in real estate or do I give up.  Only you can answer that.  Remember many have failed only to get up wipe themselves off & double their resolve to keep going.  Unfortunately more have thrown in the towel.  If your why is big enough you will find the way.  

I chose to keep going.  Why?  Because I have 2 boys because I live in an expensive city because I want to travel the world & afford a nice house because I'm tired of corporate America and on and on.  I've since made my money back and have an honest business partner.  The funny thing is I made the money back rather quickly.  Almost every real estate investor, business entrepreneur startup has lost money.  Many have made fortunes despite early losses.  As for me I rarely think about the past because its negative energy.  

I hope you keep going & wish you all the best in your endeavors!

@Justin R. I would present the insurance claim against both parties. If there is no coverage, they will send you a denial letter. But do not take their word for it. They are not insurance claim reps and (respectfully) may not understand the complete scope of coverage under thier own E&O insurance.

In my experience, all closing Attorneys I've done transactions with in the state of GA only accept certified cashier check of 5k max. all else wired. Some 1k. It's getting stricter due to the level of fraud schemes.

Thank you all for your words and input. I am not a real estate "professional" but I am also not new to real estate investing. I have done many real estate transactions in the past with no problem. This is also the reason why I am sharing this information. I don't want this to happen to anyone else. Anyone who thinks they are above this crime and cannot be a target is wrong. I am not a lay person who would typically be scammed by the common cyber criminal that we get warned about. 

I was confident in the wiring instructions because they came 30 minutes after I talked with my real estate agent, who mentioned they would be to me within the hour. They came in PDF format with the company logo and all associated symbols, wording, etc. The emails also included information that helped prove they were who I thought they were because they were acting as a intermediary to all parties. Yes, a phone call would could have caught the wrong checking account number. To take it a step further though, this complex crime could have easily gave a false number. Again, my point isn't to scare anyone, but to make you aware of this, and go above your typical due diligence.

From my experience, $9,999 is the max I can send by cashiers check. Unfortunately, I lost well above that. From talking with the FBI this is a relatively brand new crime. The first ones were reported 2 to 3 years ago. In the last six months there has been a huge influx in these crimes. The National Assoc of Realtors, FTC, BBB, FBI, and countless RE journals and publications have warned about such. They warn the agents not to use unsecured email, and title companies not to PDF email wiring instructions. I was ignorant to these warnings, and learned the hard way.

Had this happen to me also, they got SUPER close to actually getting a 200k wire.   In the end we figured it out before the money was sent but it was SUUUUPPPPEEEERRR close to being lost forever.      In my instance my assistant's email was "hacked" and they were trying to divert proceeds from a closing.    


I was advised by someone to contact the state bar in GA to file a complaint with the closing Attorney. They mentioned as an "Industry Professional" they failed to follow "best practices" and were negligent in their actions. My "advisor" said they will simply make a claim with their emissions insurance.

Does this sound like sound advice, or should I go the route of litigation?

Thanks

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