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New York Sues Zelle Over $1 Billion Fraud Losses

Marco Sorenson by Marco Sorenson
August 13, 2025
in Business
New York Sues Zelle Over $1 Billion Fraud Losses

New York Attorney General Letitia James filed a lawsuit against Zelle because the payment platform’s security weaknesses enabled criminals to steal more than $1 billion from users.

The lawsuit filed in state court on Wednesday asserts Zelle and its parent company Early Warning Services failed to establish fundamental security measures even though they understood the system had vulnerabilities to fraud. The complaint states that the company disregarded customer reports of fraud while allowing scammers to continue operating on their platform.

The fraud situation described by James as “rampant” included scams that used hacked accounts and fake goods sales as well as impersonation of banks and government agencies. The lawsuit disputes Zelle’s marketing claim of bank-backed safety because the company fails to deliver on this promise.

Zelle denied the lawsuit was a political stunt because more than 99.95% of its transactions were completed without any reported fraud issues. The banks themselves were not named as defendants.

Zelle entered the market in 2017 when it started competing with PayPal’s Venmo and Block’s Cash App. The Consumer Financial Protection Bureau abandoned its lawsuit against Zelle in March after Trump regained the presidency.

Tags: Zelle
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