Efficient Services Escrow Group of Irvine, California, was subjected to a $1.5 million Cyber heist that caused it to go out of business and lay off all 9 of its employees. Escrow companies are responsible for safeguarding funds, and if escrowed funds are at risk, the state regulator has the right to step in and protect those escrowed funds.
What went wrong?
Between December 2012 and January 2013, Efficient Services was hit with three separate fraudulent wire service transfers. These were from the company’s bank, First Foundation of Irvine, CA, to bank accounts in Russia and China. The first $432,215 that left Efficient Services’ account on Dec. 17 was recovered from Russia, but two other wires totaling over $1.1 million, which were sent to China on Jan. 24 and Jan. 30, were not recovered.
Efficient Services reported its losses to the California Department of Corporations on February 22, which launched an investigation. On Feb. 28, The Department of Corporations froze the escrow company’s activity and noted that the company had previously had instances of negligent bookkeeping and record-keeping practices.
According to former Washington Post reporter and now fraud blogger Brian Krebs, who first reported the Efficient Services incident on Aug. 13, the bank initially thought the losses resulted from embezzlement, not an account hack.
Why is this important?
Since then, a state investigation determined that a cyber theft was to blame for the losses. The cause of the incident was a remote access Trojan virus that was planted in Efficient Services’ systems. Nonetheless, the escrow company, unable to make up for its losses, has closed.
This incident now stands as one of the largest account takeover cases on record, eclipsed only by the June 2010 Global Title Services theft, which resulted in $2 million in fraudulent transfers and just over $200,000 in unrecovered losses.
In a case like this it is hard to determine whether the responsibility lies with the company or the bank. No litigation has been filed yet, but a civil suit may be filed in order to resolve the issue of responsibility for this case. Regardless, the fact remains that a cyber security breach has caused the company to close its doors and terminate jobs.
This cyber attack killed a viable business that was on its way to clear half a million in profits in 2014 and a million the year after.