A Connecticut law firm is facing a massive malpractice lawsuit that allegedly left its clients vulnerable to cyber fraud due to inadequate security measures.
Richard Bates, a resident of Palm Beach Gardens, Florida, filed a federal lawsuit against his attorney Patrick Walsh and the Ridgefield-based firm Hastings, Cohan & Walsh, LLP. Bates claims the firm’s allegedly lax cyber security cost him a staggering $597,000 during a recent home purchase.
Bates had hired the firm to help buy a home in Connecticut worth more than $800,000, the Real Deal reported.
According to the complaint, the hackers allegedly breached the firm’s private emails, grabbing crucial details about the transaction, including the buyer’s purchase price, contact information and time.
Bates received an email from what he believed to be his law firm, complete with instructions. Trusting them, he sent the money – only to discover later that the email was a sophisticated fake. Hackers made off with $726,000; the banks were only able to recover $129,000.
Upset, Bates has criticized his lawyer for what he calls “virtually no protocol” to prevent fraud. His lawsuit paints a grim picture of the firm’s alleged cybersecurity protocol, describing it as relying on “archaic email and data storage systems.”
Bates claims that if the firm had implemented basic safeguards, such as two-factor authentication, the fraud would not have occurred. He also accuses the firm of doing “virtually nothing” to fix the situation after the fraud.
This is not a new issue in the world of real estate. Professionals have been on high alert for years, aware of the rising tide of scammers hacking emails and sending fake wire instructions.
The FBI reports that cyber fraud losses grew from less than $9 million in 2015 to more than $446 million by 2022.
Stephen Conover, a Connecticut attorney specializing in legal ethics, told TRD that while lawyers are often also victims, they are not liable for crimes against clients unless they breach a fiduciary duty or fail to meet a “reasonable standard of care.” . Conover points out that such lawsuits are usually settled out of court, thanks to insurance carriers.
Katie Carey, another real estate attorney in Connecticut, points out that two-factor authentication is just the beginning. It uses powerful cloud-based software with a customer portal and multiple fraud prevention mechanisms.
Her email signature even screams, “WIRE FRAUD IS REAL! We will NEVER email you to solicit funds! Call the office immediately if you receive such an email.”
Whether attorney Walsh has a similar warning in his email signature is unclear — Walsh did not respond to requests for comment.
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