New York Attorney General Files Suit Against Early Warning Services Over Zelle Fraud Controls
August 13, 2025
In a significant legal move, New York Attorney General Letitia James has initiated a lawsuit against Early Warning Services, LLC (EWS), the operator behind the electronic payment platform Zelle. The lawsuit alleges that EWS, owned and governed by a consortium of major U.S. banks, has failed to implement necessary fraud protections, resulting in substantial financial losses to consumers. Between 2017 and 2023, over $1 billion was reportedly lost to fraud on the Zelle network, a situation exacerbated by the platform’s design flaws and absence of critical safety features.
The Office of the Attorney General’s investigation uncovered that EWS was aware from Zelle’s inception that its system was uniquely vulnerable to fraudulent activities yet neglected to enforce essential safeguards or impose meaningful anti-fraud regulations on its partner banks. Attorney General James stepped in after the Consumer Financial Protection Bureau (CFPB) withdrew from a related lawsuit initiated in December 2024, following a transition in federal leadership. The current lawsuit seeks restitution for affected consumers in New York and a mandate for EWS to implement robust anti-fraud measures.
“Victims of scams should not be left to navigate the aftermath alone,” Attorney General James stated. “I am committed to obtaining justice for New Yorkers impacted by the security deficiencies of Zelle.”
EWS was established by some of the nation’s largest banks, including JPMorgan Chase and Bank of America, with a mission to create a competitive electronic payment service against offerings like Venmo and PayPal. However, in their eagerness to attract users, EWS prioritized a swift, simplistic registration process that compromised verification steps essential for preventing fraud. This facilitated the entry of scammers who exploited the system’s immediate and irreversible transaction model, often draining victims’ accounts within moments.
Zelle quickly became notorious as a platform for fraudulent transactions, with schemes typically involving unauthorized access to users’ accounts or the duping of consumers into sending funds under false pretenses. For instance, one victim was tricked into believing they owed money to a utility company, only to discover they had been scammed when their bank, JPMorgan Chase, informed them that recovery of the transferred funds was impossible.
The Attorney General’s investigation revealed a troubling trend: EWS and its affiliated banks were aware of escalating fraud for years, yet minimal measures were taken to counteract these activities. Even as reports of fraud arose, EWS did not insist on timely reporting from partner banks, allowing fraudsters to target additional victims. Although EWS developed preliminary anti-fraud strategies as early as 2019, these remained unimplemented.
In promoting Zelle, EWS purportedly assured users of safety and security, a claim that starkly contrasts with the rampant fraud that ensued under their management. Attorney General James’s allegations center on the assertion that EWS not only created a highly susceptible payment environment but also misrepresented its reliability to consumers.
The lawsuit highlights significant implications for cybersecurity, pointing to substantial weaknesses in how the payment platform was architected and managed. It draws attention to potential tactics outlined in the MITRE ATT&CK framework, particularly concerning initial access and exploitation of user trust, which fraudsters capitalized on for unlawful gains. The ongoing case underscores the need for stringent security measures and consumer protection protocols in the burgeoning landscape of digital payment systems.
James’s record in consumer advocacy is notable; her office has previously targeted payday lending practices and deceptive banking operations, showcasing her commitment to protecting New Yorkers. As this case unfolds, affected consumers are urged to report their experiences to the Attorney General’s Consumer Frauds Bureau to aid in the broader efforts against financial misconduct.
This issue is being managed by Assistant Attorneys General Chris Filburn and Christian Reigstad from the Consumer Frauds and Protection Bureau under the oversight of Bureau Chief Jane M. Azia. As the legal proceedings progress, the outcome will likely serve as a precedent for regulatory accountability in the financial technology industry.
