Teamwork between a Dinsmore client’s Commercial Litigation attorney and the Firm’s Cybersecurity & Data Privacy team recently led to the recovery of nearly $300,000 after the client was targeted by a sophisticated business email compromise scheme.
The client developed a multi-million-dollar affordable housing project designed to support single-parent families in the Louisville, Kentucky region. The development was funded through a combination of grants and charitable donations. As part of the construction process, the client was required to release a standard retainage payment to its general contractor after receiving final grant funding.
After the funds cleared, the client wired the retainage payment to what they believed was the contractor’s bank account. However, a bad actor had compromised the contractor’s email system and sent a fraudulent message directing payment to a new account. The account was held at a credible bank and appeared legitimate.
The client believed the funds had been temporarily restrained by the bad actor’s bank when the bad actor, pretending to be the contractor, claimed its bank had restricted access to the account. The client continued corresponding with the fraudster, believing it was communicating with the contractor, until the deception was discovered more than a month later.
When the fraud was discovered, Dinsmore’s client immediately contacted local law enforcement, the federal authorities, and its own bank. Despite those efforts, they were unable to confirm whether the funds could be recovered or had been permanently lost.
The client then turned to its Dinsmore attorney, Harris Davidson (Louisville), who has worked closely with them in the past, for additional help. Harris connected with attorneys in Dinsmore’s Cybersecurity & Data Privacy group to strategize the next steps for the client. Partner Herb Stapleton (Cincinnati), who has more than two decades of experience in the FBI, quickly identified the incident as a business email compromise, one of the most prevalent and financially damaging cyber fraud schemes targeting organizations today.
Drawing from the relationships he built while in the FBI, Herb reached out to the appropriate internal contacts at the fraudster’s bank and even got in contact with upper management at the bank’s global investigations team.
Within a single day, Herb was able to confirm that the bank had frozen the funds and that the entire payment remained intact. The recovery brought immediate relief to the client, who faced significant financial strain given the grant-based nature of the funds and its nonprofit status.