Agent Found Responsible For Wire Fraud Loss; Do You have $200,000 To Spare?!

A Federal Court has upheld a jury’s finding that a real estate agent and broker were 85% responsible for a wire fraud that cost their client $196,622.67 (Bain v. Platinum Realty, LLC, Dist. Court, D. Kansas 2018).

Jerry Bain was working with a real estate agent to purchase a property. To fund the purchase, Bain was instructed to wire $196,622.67 to the title company. Unbeknownst to the parties involved, a criminal was intercepting e-mails exchanged between the title company, agent, and Bain. Bain had actually been sent hacked wiring instructions, which instructed him to wire funds straight to the criminal’s account. Once the funds were sent they could not be recovered and so Bain sued the agent, the broker, and others.

In finding the real estate agent and broker liable, the court emphasized several points which can provide valuable lessons to all agent:

  1. The real estate agent was serving as the middleman between the settlement agent and her client. Serving in this role made her responsible for the delivery of accurate instructions to her client.
    LESSON: Have your client communicate directly with the title company!  Each transmission of an electronic message increases the risk that the transmission may be intercepted.
  2. The agent failed to notice several irregularities in the both the e-mail messages and wiring instructions she received and forwarded to her client.
    LESSON: Agents must look carefully at electronic communications.  Many fraudulent e-mails can be identified based upon a basic visual inspection.  Any irregularities should be cause for alarm!
  3. The agent did not act when she learned that her e-mail account had been compromised.
    LESSON: If e-mail security has been breached, you have a duty to others. Your e-mail provider should be contacted immediately to see what remedial steps should be taken.  Make sure you notify clients and settlement agents promptly.

This theft was in February of 2016 and, since then, criminals have only further refined and perfected their schemes. Avoiding wire fraud now is more difficult than ever. All real estate agents must make their clients aware of the risks surrounding wire fraud. One of the simplest ways to protect clients against wire fraud? Instruct clients to deal directly with the title company to ensure they received the correct wiring instructions (preferably by phone). Make clients aware that title companies DO NOT change their wire information!

For more information, check out the security section on our website or our recent blog post about what cyber security measures agents and title companies should take to protect against wire fraud. Looking for more in-depth info on Bain v. Platinum Realty? Contact one of our on-staff attorneys – Pat McVeigh – for a deep dive.

About the Author:

Tracy Richardson is the marketing specialist for Liberty Title and Zing! Title. She is in the third generation of Richardsons working in the title business (and under the Liberty Title umbrella...) She enjoys reading and writing but tends to stay away from arithmetic. Questions on how to care for a feisty chihuahua? Ask her...she has plenty of experience from handling her own, Wiggleston.
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