The Wire Fraud Story You Can’t Afford To Miss

I can still remember the nerves I had during one of our first real estate wire transfers. At the time there had been a flurry of news articles about a recent increase in wire fraud and how scammers were finding ways around previously secure transfers.

The property we were purchasing was a fixer-upper and we were going to BRRRR it. Because of our strategy, we were paying cash, so the day before closing we were instructed to wire a lump sum to the title company. The property, along with all of the other professionals we were working with, was out of state and I had never visited the title company we were sending funds to. When I got the instructions from our Escrow Officer for our wire transfer, I felt a wave of paranoia and I began to seriously consider if the title company was real or if I would be sending thousands of dollars to The Prince of Nigeria.

I Googled the title company, I reviewed their listing on the Better Business Bureau, I called our broker to confirm that the title company information was correct, and when everything checked out, I called the title company to confirm our wire instructions. I knew that even if the title company checked out, there was a chance that the email could have been intercepted. My paranoia wasn’t completely unwarranted.

Back when Chris was in the Navy, and away on one of his first few deployments, my email had been hacked by some poor fool who was using an IP address in South America. Chris was on a submarine so he and his crew would often go dark and have radio silence for months at a time. The submarine force is often referred to as the “silent service”, and a large part of the value that submarines add is their ability to be wherever they are, completely undetected. Their mission and the safety of the crew depends on it.

The only form of communication that deployed submariners have with family back home is email, and any violation of operational security can cause the submariner or a family member to lose the privilege of email. Discussing topics like boat traffic, entry and departure dates, events at home that might be upsetting, or anything that could compromise the mission are all terms for termination of email access. So you can see how my hacked email address may have been an issue for the Global Force For Good.

One day, not long after I had emailed Chris, I got an email from Yahoo! saying that my email address had been compromised and that they were launching an investigation. Not your typical Mailer-Daemon-Failure email. I didn’t think much of it and a couple days later I was at dinner with some other Navy friends when I mentioned the email from Yahoo!.

One of our friends happened to be NCIS (yes, like the show) and the conversation switched from light-hearted to serious as he began drilling me for details about the email from Yahoo!. As we were talking, one of my other friend’s shared that she had gotten the same message from her email server. Her husband was on the same boat as Chris. NCIS launched a full blown investigation into the matter and needless to say, I lost my email privileges to Chris’ boat.

At the close of the investigation I wasn’t told much except that the hack had happened in South America by someone and NCIS had determined he was no longer a threat to Chris or his crew. I pity the fool.

The day that I ended up calling the title company to confirm wiring instructions, I remembered the vulnerability of email and the risk of sending sensitive information. Our Escrow Officer confirmed the instructions, I wired, we closed, we rehabbed and rented out the property without any issues, fraud, or scammers in South America.

But this is not the case for everyone. A while back, I read Paul Moore’s article, “How to Lose $225,000 in a Wire Transfer Fraud Scheme”, and it is an article you can’t afford to miss. My stomach sank as I read the account of “John” and the wiring instructions that were intercepted, changed, and funded before his team knew what was happening.

Paul opens by saying,

“If you’re involved in real estate or if you move money around through banks or if you’re alive and have a pulse, this article should strike fear into your heart.”

He goes on to explain the details of the scam and the aftermath for John and his partners. It is a story that every investor should have in the back of his mind as he goes to transfer money. Just last month I was at a title company and overheard an Escrow Officer telling the staff that one of their clients had just gotten a strange email from the title company. As it turns out, the wiring instructions email had been intercepted and changed by scammers. Thankfully, the client was savvy enough to catch some grammatical and syntax errors and was able to get the correct instructions before wiring.

The details of how wire fraud is carried out will continually change as scammers learn new tactics but my hope is that investors continue to become more savvy and discerning as we share stories like this. To read Paul Moore’s full article, go to biggerpockets.com.