Wire Transfer Fraud – Real World Cases and Tips on How to Avoid

Most closings of home sales involve a wire transfer of funds as one the final steps in achieving a successful transfer of property. Unfortunately, we live in a time that this process is not fool proof and can lead to the loss of funds to criminals. Typically, the root of the problem is email hackers who have penetrated email accounts from seller/buyers, closing agents, real estate brokers, title companies and real estate attorneys.

The article below was in Florida Realtor News late last week documenting the events that led up to the loss of funds due to wire fraud. If your selling or purchasing a home, you could be a target.

To protect your money Please read the complete article to educate yourself to avoid this from ever happening to you.

NAPLES, Fla. – Oct. 31, 2018 – When Maryland residents Roger and Shirl Lynn Butschky sold their home in East Naples more than a year ago, they didn’t get their money after the closing. Every dime – more than $450,000 – went to a fraudster who sent bogus new wiring instructions to the couple’s title company at the last minute without their approval or knowledge, according to court documents and a report filed with the Naples Police Department.

The Butschkys sued Dunn Title in Naples and several of its employees for negligence and breach of fiduciary duty in 2017, seeking damages and a jury trial. The lawsuit is still pending in Collier Circuit Court. Real estate wire fraud, a form of cybercrime that intercepts money transfers in home sales, is nothing new. It can take many forms. Local experts say Southwest Florida is ripe for such scams because of its wealth and plentiful supply of high-end homes.

Title fraud is common

“It’s common. It actually happens all over the country – this title fraud,” said Amanda De Medeiros, fraud line coordinator for the Lee County Sheriff’s Office. Last year the FBI’s Internet Crime Complaint Center received more than 300,000 complaints, with reported losses of more than $1.4 billion. The real estate sector was heavily targeted with 9,645 victims, who lost more than $56.2million. In 2016, the number of fraudulent wire transfer scams reported by title companies and closing agents to the Internet Crime Complaint Center increased by 480 percent.

The crime has been reported across the country – in every state.

Many title companies, Realtors, real estate lawyers and banks have tightened their rules and procedures for closings to try to fend off fraudsters. Still, sellers and buyers should stay alert, especially as a sale draws closer.

“Just stop for a minute and think about things and double check and triple check. Pick up the phone and have a conversation with your title agent,”

said Bryan Oglesby, director of public relations and outreach for the Better Business Bureau serving West Florida.

In the Butschkys’ case, the FBI got involved after the couple’s money came up missing. After investigating the fraud, the FBI recovered less than $30,000, so the couple still lost more than $421,000 on the sale of their home, according to court documents. “It’s very unfortunate. They lost a lot of money,” said their attorney Michael Petruccelli, with offices in Naples and Fort Lauderdale.

Wiring instructions changed

According to court documents, the scammer posed as a legal representative for the transaction in an email sent to the closing agent and asked for a change in the money transfer instructions, claiming the request came from the Butschkys’ son.

No such directions came from the couple’s son. “That was from the fraudster,”

Petruccelli said.

In their lawsuit, the Butschkys accuse the title company and its employees of not having the proper policies and procedures in place to avoid such scams and failing to meet industry standards in their handling of the closing.

Additionally, the couple claims Dunn Title’s employees should have spotted red flags that ought to have put them on high alert before following the new wiring instructions. Court documents show there were three attempts at changing the instructions for the money transfer. After two other banks refused to clear the funds because the sellers’ names didn’t match up with the bank account numbers, Iberia Bank finally accepted the money anyway, which then quickly disappeared.

Email hacked

In a report filed with the Naples Police Department, Michelle Roman, the closing agent for the transaction, said she didn’t suspect anything until she learned the Butschkys hadn’t received their money a few days after their home sold. She said that’s when she contacted the IT department at Dunn Title, which looked over her computer and concluded her email had been hacked. Roman reported Dunn Title was “a victim of a scheme to defraud” to the Naples police and she wished to prosecute on the title company’s behalf.

In a court filing, Roman and the other defendants argue the lawsuit should be dismissed for several reasons. Their arguments include the suit wrongly lumps the defendants under a single count of negligence and assumes a fiduciary duty that doesn’t exist between Dunn Title and the sellers.
Omega Title Naples LLC – doing business under the name Dunn Title – had a contract with the buyers, not the sellers.

Roman no longer works for Dunn Title. She chose to leave the company, but she’s still in the title business in Naples. She declined to comment.

Title company too busy

In sworn testimony, Roman said mistakes were made at Dunn Title because it didn’t have enough employees to handle the workload. Management, she said, refused to hire more staff, claiming the office was “not making any money.” Dunn Title’s chief executive and owner Scott Dascani disagrees.

“She did have enough staff in my opinion,” he said in a phone interview. “She felt like she didn’t. Everybody is entitled to their opinion.”

Dascani, who is also a named defendant in the suit, blames the Butschkys’ lawyers, Threlkeld & Cetrangelo in Naples, for the mistake, although the sellers aren’t suing the firm. He said he’s convinced the fraudster obtained detailed information about the closing by hacking into the law firm’s email first.

“My heart goes out to anybody that’s gone through this. It’s terrible,” Dascani said.
He believes the Butschkys will get their money back, but there’s a legal process they need to go through for the insurance companies that cover these types of losses to react, he said.

Schemes get more sophisticated

Dunn Title has gotten more cautious with closings since falling victim to the scam, Dascani said. But he noted the title fraud schemes are getting more sophisticated, with the fraudsters now taking over the mobile-phone accounts of their victims by gaining access to their SIM cards.

“If I could take everybody back in time to receive the paper check at closing, we wouldn’t have this situation,” Dascani said. “Unfortunately, it’s the times we’re in.”

Over the past year a few victims have reported title scams to authorities in Southwest Florida, while other cases of the fraud have flown under the radar. In January, Domenic Costantini, a Naples Realtor and residential builder, filed a report with the Collier County Sheriff’s Office, saying he and his client were targets of wire fraud. According to the report, a scammer sent an email that looked like it came from Costantini to one of his buyers with instructions for a wire transfer needed for a closing. The buyer followed the instructions and sent the money, only to discover the email didn’t come from Costantini and the money didn’t go to the real title company. The Sheriff’s Office didn’t disclose how much the buyer lost. The information was redacted from the incident report made available to the public. Costantini couldn’t be reached for comment about the outcome of the case.

A lucky break

Naples real estate attorney Liz Hazelbaker almost fell victim to wire fraud in February after selling her house in North Naples, but she never reported it to authorities. She and her husband had provided instructions to the title company to pay off a $400,000 loan on the day of the closing, with money from the sale. Two days before the closing, a scammer – posing as the couple’s bank – sent an email to the title company with new wire instructions. As a result, the money went to the wrong bank on the day of the closing.

“The day after closing, I called our bank to make sure they had received the $400,000 and they said no. I called the title company and they sent me the wire confirmation. This is when I realized the money went to a Chase Bank account and not to our bank. We were able to get the money back from Chase – luckily,”

Hazelbaker said.

She was lucky to get the money back because she had friends working in the law department at Chase Bank, who got the account flagged and locked down to protect her money, she said.
“Normally the money gets yanked immediately into a foreign account, and once it leaves the U.S. there is nothing that can be done,” Hazelbaker said. “These scammers try to get it out as quick as possible.”

A growing problem

She fears title schemes might be a growing problem in Southwest Florida.
“When I was talking to other legal people about this, they were like ‘this happens all day, every day,'” Hazelbaker said. “It just made me want to throw up. It’s like every day, people’s money is getting stolen. It’s the new bank robbery. You’re not stealing from the bank, but the customers.”
She’s not eager to sell or buy another house anytime soon. “I’m not going to do a real estate transaction for a while,” she said. “I’m still really freaked out by the whole thing.” Since she was scammed she’s heard more horror stories including one from a friend who owns a title company in Cape Coral who paid a client $200,000 because of wire fraud. That’s the amount a fraudster stole by impersonating his client in an email and changing the wiring instructions on a sale, Hazelbaker said.

“I think it’s getting worse, and I think people are hearing about it more. I had never heard of it and I’m actually an attorney,”

she said.

How to avoid a title scam

  • Never accept a change to an agreed transaction based on an email.
  • If someone tells you there’s a new plan, especially one that involves thousands of dollars, check it out before you send a dime. Call your agent or title company and make sure the new directions are legitimate.

Tips to spot a phishing scam

  • Do not click on links or open files in unfamiliar emails.
  • If a company usually contacts you by phone, be suspicious if you suddenly start receiving emails or text messages.
  • Just because an email looks real, doesn’t mean it is real.
  • If something seems suspicious, check the company’s website or call them.
  • Email is not a secure way to send financial information.

Source: Journal Media Group, Laura Layden

Ken Poirier

Hi, I'm Ken Poirier a local area resident and Realtor in Punta Gorda, Fl. To learn more about the incredible real estate available in the Punta Gorda, Port Charlotte and North Port areas, please feel free to contact me directly by phone at (941) 661-9773, email ken@paradiseinpuntagorda.com or connect with me on Facebook.

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