BigLaw firm sued over $3M wire transfer to fraudster's account
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Updated: Holland & Knight is facing a lawsuit alleging that it failed to prevent the transfer of more than $3 million to a fraudster’s account in Hong Kong.
The lawsuit, filed in June in Utah state court, was removed to federal court this week, the American Lawyer reports.
Holland & Knight is accused of failing to investigate after the fraudster intercepted emails regarding a stock sale, posed as the seller, and instructed the law firm to wire $3.1 million from the stock buyer to another account. The new fraudulent account was identified as Wemakos Furniture Co. Limited.
Holland & Knight sent an email addressed to the stock sellers seeking to verify the new account. But it was intercepted by the fraudster and never received by the sellers, the suit says. The fraudster sent Holland & Knight new documents that included information on the new account, held under a slightly different name, HongKong Wemakos Furniture Trading Co. Limited.
The lawsuit plaintiffs were two foundations selling the stock. One of the foundations, the Sorenson Impact Foundation, invests in startups that serve underserved communities, according to the foundation’s website. The other foundation, the James Lee Sorenson Family Foundation, is a nonprofit trust in Utah.
The foundations had hired Holland & Knight to document the stock acquisition and carry out a merger plan related to the stock sale, according to the lawsuit.
The suit says Holland & Knight and the transfer agent, a second defendant, should have been on notice that the accounts weren’t legitimate, given inconsistencies in documents. Nor did the defendants contact the stock sellers by phone to verify the emails, the suit says.
The defendants should also have been aware that international wire transfers to China have a risk of being fraudulent, according to the suit.
The suit alleges breach of fiduciary duty and breach of contract.
Holland & Knight provided this statement to the ABA Journal: “Holland & Knight’s information technology system was not compromised in any way. The plaintiff was not a client, and the firm acted on wiring instructions received from the plaintiff’s email system by providing the instructions to the paying agent.”
Updated July 23 at 2:05 p.m. to include statement from Holland & Knight.