NY AG Sues Zelle Operator Over Alleged $1B in Fraud Losses

New York Attorney General Letitia James has filed a lawsuit against Early Warning Services, the operator of Zelle, alleging that over $1B in fraud losses occurred between 2017 and 2023 due to inadequate tax safeguards. The lawsuit claims that EWS was aware of the issues but failed to take action, allowing scammers to exploit the platform.

New York Attorney General Letitia James has filed a lawsuit against Early Warning Services (EWS), the operator of the Zelle payment network, alleging that the company enabled widespread fraud, resulting in over $1 billion in losses between 2017 and 2023. The lawsuit claims that EWS was aware of the vulnerabilities in the platform but failed to implement adequate safeguards, allowing scammers to exploit the system.

The lawsuit, filed in New York state court, alleges that EWS designed the Zelle network without critical safety features, making it susceptible to fraud. The company knew from the outset that key features of the Zelle network made it uniquely vulnerable to fraud but did not adopt basic safeguards or enforce meaningful anti-fraud rules on its partner banks.

EWS is owned and controlled by a group of the largest banks in the United States, including JPMorgan Chase, Bank of America, Capital One, and Wells Fargo. These banks tasked EWS with developing and operating the Zelle platform to compete with other payment apps like Venmo, PayPal, and CashApp. However, in their rush to launch, EWS prioritized attracting new users through a simple registration process and quick transfers, leaving consumers vulnerable to scammers.

Zelle's advertisements misleadingly promised safe and secure money transfers. In reality, the banks backing it objected to basic anti-fraud safeguards. Beginning in 2017, 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. Scammers could sign up through a quick registration process that lacked important verification steps, allowing them to utilize misleading email addresses.

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 instance, a New York user received a call from an individual impersonating a Con Edison employee, advising that the consumer was delinquent on his energy bills and that his electricity was going to be shut off unless he paid Con Edison via Zelle. The consumer transferred $1,476.89 to a Zelle account named "Coned Billing," but after realizing the call was a scam, was told by their bank, JPMorgan Chase, that the bank "can't get [him] that money back."

The OAG's 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, enabling bad actors to scam additional consumers. 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.

EWS aggressively marketed Zelle to New Yorkers, promising safety and security. However, EWS's failures enabled fraudsters to run rampant on the Zelle network, leading to millions of dollars in losses for New Yorkers. Attorney General James alleges that EWS violated New York law by creating a payment platform highly susceptible to fraud and doing little to stop it for years while falsely marketing it as a safe and secure service.

With this lawsuit, Attorney General James is seeking restitution and damages for all affected New Yorkers and court orders mandating EWS maintain necessary anti-fraud safeguards and take other steps to protect their customers from fraud. This matter is being handled by Assistant Attorneys General Chris Filburn and Christian Reigstad with the Consumer Frauds and Protection Bureau.

References:
[1] https://ag.ny.gov/press-release/2025/attorney-general-james-sues-company-behind-zelle-enabling-widespread-fraud
[2] https://www.paymentsdive.com/news/ny-sues-early-warning-over-zelle-fraud/757570/
[3] https://www.cnbc.com/2025/08/13/new-york-letitia-james-zelle-lawsuit.html