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Feds: MN company lost $40 million to internet scam

A Minnesota-based company was swindled out of nearly $40 million by internet scammers operating what is commonly known as a spear phishing scheme, according to a recent civil forfeiture filing from U.S. Attorney Andrew Luger.

The company is not identified in the 13-page document.

According to the filing, the con began on May 29, 2014 when a “person purporting to be the CEO” of the unnamed company sent the company’s accounts payable coordinator an email with the subject line “Confidential Matter.”

“Attorney David Madison is going to contact you,” the email from the fake CEO stated. “We are currently acquiring a company and so we will be needing your direct attention concerning accounting documents to finalize this acquisition. I inform you that I gave all the power to our Attorney that will be handling this operation. So please send the information and execute everything he needs.”

“This is of the upmost importance, we need to file this asap and conclude with the first deposit. Attorney Madison will inform me of the evolution of this operation,” the message continued. “For reason of confidentiality and to follow the strict guidelines of an Acquisition we will only be in contact by email. Any questions you may have, please address them directly to Mr. Madison. You are the only one that is aware as of now, so I would need you to keep this reserved for yourself until the public announcement.”

Not long afterwards, according to the filing, an unknown individual who identified himself as David Madison then telephoned the coordinator to discuss the details of the phony transaction.

“Madison subsequently provided the coordinator with the specific details of wire transfers that he claimed were necessary to complete the supposed acquisitions,” the filing states. “In each instance, the Coordinator was instructed to make the payment in Euros to a foreign account.”

Believing both the communications and the purchase were legitimate, the coordinator then wired over $52 million in nine separate transactions to banks in China and Slovakia over the next two weeks.

Three days after the last of the wire transfers, the company’s executives discovered they’d been swindled. They were able to recover the funds sent in the final transfer — $12.7 million to the Agricultural Bank of China – but none of the others.

The following month, according to the filing, the U.S. government served a seizure warrant on the New York branch of the Bank of Communications for $755,877 – which was all that remained of the more than $10 million that the company wired to the BOC’s Shanghai branch in two other transactions.

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