New York Attorney General Letitia James today sued Early Warning Services, LLC (EWS), a company owned and controlled by a group of the largest banks in the United States that was tasked with developing and operating the electronic payment platform Zelle, for failing to protect its users from massive amounts of fraud.

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. 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.

Attorney General James filed this lawsuit after the Consumer Financial Protection Bureau (CFPB) abandoned a similar lawsuit, filed in December 2024, following the change in the federal administration. With this lawsuit, Attorney General James 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.

EWS is a financial technology company owned and controlled by a group of the country’s largest banks, including JPMorgan Chase, Bank of America, Capital One, and Wells Fargo. Those banks tasked EWS with hastily launching an electronic payment platform to compete with payment apps like Venmo, PayPal, and CashApp, which were not controlled by banks. In their rush to launch, EWS prioritized attracting new users through a simple registration process and quick transfers that left consumers vulnerable to scammers

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.

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 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.

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, which enabled bad actors to scam additional consumers.

In fact, when Zelle launched, EWS did not require participating banks to report scams. 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 failed to meaningfully enforce even the limited, inadequate anti-fraud rules that it did have in place against participating banks despite knowing of widespread violations of those rules.

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.