Online phishing schemes are nothing new. They’ve been around for many years now and start with an email to home buyers about wiring a final payment; then scammers intercept and take it all.
A D.C couple Sean Smith and Erin Wrona who were hopeful they were going to purchase a home but fell victim to a scam. They wired their title company $1.57 million upon request; they only thought it was a routine request leading to the closing on the purchase of a five-bedroom, 2,300-square-foot Cleveland Park home.
A month later when they went to the offices of Federal Title & Escrow to sign the final paperwork, an attorney for the company told them that the funds the couple thought they had wired had not ended up in escrow as expected. As a matter of fact, no one at Federal Title even had knowledge the money had been sent.
The National Association of Realtors first had knowledge of the problem in early 2015, and along with the Federal Trade Commission issued warnings about the scam.
“Hackers have been breaking into some consumers’ and real estate professionals’ email accounts to get information about upcoming real estate transactions and after getting to know the closing dates, the hacker sends an email to the buyer, posing as the real estate professional or Title Company. The bogus email says there has been last minutes change to the wiring instructions and tells the buyer to wire closing costs to a different account. But it’s the scammer’s account.”
Connor Dowd, broker for Keller Williams Realty in Newport, Rhode Island last year said: “This is, sadly, a pretty common scam that’s running in the real estate industry. Everyone thinks it can happen to someone else and not them.”
A current lawsuit now explains the problem of the missing wired money. Smith and Wrona supposedly fell victim to a hacker who had gained control of Federal Title’s servers. He sent the couple an email asking them to wire the $1.57 million for the home purchase to a bank account. They, however, had no knowledge the account was controlled by the hacker.
Dissimilar to many victims in those scams, Smith and Wrona lost almost the whole amount of what they were going to pay for the house, except some $200,000 they put down separately as a deposit. Many of these cases involved closing costs involved in home purchases. Nikki Lyon, Federal Title spokeswoman in a statement, says the incident springs from “what appears to be a cybercrime attack on our information systems.”
“Federal Title discovered the attack and immediately reported it to the FBI. Federal Title continues to work with the FBI as they complete their investigation. Federal Title’s internal review has revealed that no other customers were affected by this attack,” she stated.
Smith, who works for a U.S. Senator, and Wrona, a statistician with the U.S. Census Bureau are however not satisfied with those guarantees and filed a lawsuit against the company, alleging that Federal Title either plotted to defraud them of the $1.57 million or was so careless in its online security protocols that it allowed someone else to steal the money.
The couple’s attorney Michael Nadel stated that “Federal Title either caused our money to be stolen or stole it, and we need to get our money back. We don’t have any evidence that it happened because of hackers other than Federal Title’s say-so.”
He also added that Federal Title, which has offices in Logan Circle and Friendship Heights, did not communicate potently with the couple ahead of the closing. He later connected the circumstance to Federal Title participating in the scheme.
“Federal Title never called Sean Smith and said, ‘Bring your money to closing,’ and didn’t even bring it up until the middle of closing. So if they weren’t responsible for helping steal the money, it certainly seems like they knew well in advance of that closing that the money was gone. Their conduct shows that” he stated.
Similar scams are happening over the years throughout the country with Investigators believing criminals are hacking into real estate agents’ email accounts and monitoring their communications with title companies, lenders, and clients.
Sean Smith and Erin Wrona are however not just demanding they’re $1.57 million, but also demanding about $5 million for a supposed violation of RICO (The Racketeer Influenced and Corrupt Organizations Act), the law notable for its use against the mob.
Nikki Lyon Federal Title’s spokeswoman repudiates that the company had anything to do with the money going missing.
“While the investigation is ongoing, Federal Title wishes to unequivocally and categorically deny the plaintiffs’ allegations that FTE and its employees were somehow complicit with the person or persons who perpetrated this scheme,” she stated in the emailed statement. “The allegations in the complaint are false and misleading and FTE will fully defend this matter.”