Email Fraud And Third-Party Hacks: Lessons From Recent Case Law

The Question

In today's digital world, email fraud is becoming increasingly common. One question arising more frequently is: If a hacker uses my email and tricks someone into sending money to the wrong account, who's responsible for the loss?

Two real-world examples of this include:

Example 1:

A business (Party A) is expecting a payment from a client (Party B). A hacker breaks into Party A's email and sends fake payment instructions to Party B. Party B follows those instructions and sends the money — but it ends up in the hacker's account; and

Example 2:

A client (Party A) has money invested with a wealth manager (Party B). The client's email gets hacked, and the hacker, posing as the client, asks for a withdrawal to a new account. The manager processes the request — and again, the money goes to the hacker.