On August 13, 2025, New York Attorney General Letitia James filed a sweeping lawsuit against Early Warning Services, the company behind the popular Zelle payment platform, reigniting a national debate over the safety of instant money transfer apps and the responsibilities of the banks that back them. The suit, lodged in Manhattan state court, alleges that Zelle failed to protect users from a wave of scams that resulted in more than $1 billion in losses between 2017 and 2023—a charge that has sent shockwaves through the world of digital payments, according to multiple reports including CNN, USA Today, and The Wall Street Journal.
The lawsuit accuses Early Warning Services (EWS), a consortium owned by some of the largest U.S. banks—JPMorgan Chase, Bank of America, Capital One, and Wells Fargo—of knowingly launching Zelle with critical security flaws. As the New York Attorney General’s office put it in a press release, EWS "designed Zelle without critical safety features," allowing scammers to exploit the system and steal from unsuspecting users. The complaint claims that the company and its partner banks were aware for years that fraud was running rampant on the platform, yet failed to take meaningful steps to halt it.
Letitia James made her position clear in a statement: "No one should be left to fend for themselves after falling victim to a scam. I look forward to getting justice for the New Yorkers who suffered because of Zelle’s security failures." Her office is seeking restitution and damages for New Yorkers affected by Zelle-related fraud, as well as a court order requiring Zelle to implement robust anti-fraud measures.
The case comes on the heels of a similar lawsuit brought by the Consumer Financial Protection Bureau (CFPB) in December 2024, which targeted EWS and its major bank owners for allegedly allowing fraud to fester on the Zelle network. However, that federal case was abruptly dropped in March 2025 after the Trump administration took office and dramatically scaled back the CFPB’s enforcement activities. According to The Associated Press, the agency’s headquarters was closed, and many of its staff were dismissed, leaving state officials like James to pick up where federal regulators left off.
Launched in 2017, Zelle was created by EWS as a direct competitor to other fast-growing payment apps like Venmo and PayPal. Its selling point was the ability to send money instantly, seamlessly integrated into users’ existing banking apps. By 2024, Zelle had amassed 151 million users, according to CNN, and processed trillions in payments. But as Zelle’s popularity soared, so too did reports of fraud—often involving scammers who gained access to users’ accounts or tricked them into sending money to bogus accounts posing as legitimate businesses or government agencies.
The lawsuit paints a picture of a platform that prioritized speed and convenience over security. As detailed in the complaint, Zelle’s quick registration process lacked basic verification steps, making it easy for bad actors to sign up as fraudulent businesses or government entities. Once money was sent, the transfers were typically irreversible, leaving victims with little recourse. In one particularly troubling example cited by James’ office, a New York resident received a call from someone pretending to be a Con Edison employee who threatened to shut off their electricity unless they paid immediately via Zelle. The victim transferred nearly $1,500 to a Zelle account called "Coned Billing," only to discover later that it was a scam. When the victim turned to JPMorgan Chase for help, the bank reportedly told them it was impossible to recover the funds.
Other stories in the lawsuit echo a common theme: consumers duped by convincing imposters, money sent in good faith, and banks unable—or unwilling—to reverse the losses. In a 2020 case, another New Yorker transferred $2,600 in an attempt to buy a puppy, only to realize too late that the seller was a fraudster. According to USA Today, victims were routinely told by both Chase and Zelle that they could not assist in recovering lost funds.
James’ complaint alleges that EWS and its partner banks not only knew about these vulnerabilities but also failed to act. The lawsuit claims that while EWS had developed basic network safeguards by 2019, it did not implement them until 2023—years after they were first proposed and after hundreds of thousands of consumers had filed fraud complaints. During this period, the platform became what James’ office describes as a "hub for fraudulent activity." The suit also alleges that EWS failed to remove known fraudsters from the Zelle network, did not require banks to reimburse customers for certain scams, and even instructed some victims to contact the fraudsters directly to try to recover their money.
In response, Zelle has pushed back forcefully against the lawsuit. In a statement provided to CNN and echoed in other media outlets, a Zelle spokesperson dismissed the case as "a political stunt to generate press, not progress," and described it as "nothing more than a copycat of the Consumer Financial Protection Bureau lawsuit that was dismissed in March." The spokesperson added, "Despite the Attorney General’s assertions, they did not conduct an investigation of Zelle. Had they conducted an investigation, they would have learned that more than 99.95 percent of all Zelle transactions are completed without any report of scam or fraud—which leads the industry." Zelle maintains that its platform is safe for the vast majority of users and that the Attorney General should focus on "stopping criminal activity and adherence to the law, not overreach and meritless claims."
The timing and political context of the lawsuit have not gone unnoticed. James, a Democrat and frequent legal adversary of former President Donald Trump, filed the suit just months after the CFPB abandoned its own case. The Associated Press reported that James herself has recently been subpoenaed as part of a Justice Department investigation into whether she violated Trump’s civil rights, underscoring the politically charged atmosphere surrounding the litigation.
For New Yorkers who believe they have been victims of Zelle-related fraud, the Attorney General’s office is encouraging them to report incidents through an online complaint form or by calling a dedicated helpline. The outcome of the lawsuit could have far-reaching implications not only for Zelle and its parent company but also for the broader financial technology industry, which has long wrestled with balancing speed and convenience against the need for security and consumer protection.
As the case unfolds, both sides are digging in for a protracted legal battle. The Attorney General’s office is pressing for restitution, damages, and strict court-ordered reforms, while Zelle’s operators insist that the lawsuit is baseless and politically motivated. For now, the story serves as a stark reminder of the risks that can come with digital innovation—and the ongoing struggle to keep consumers safe in an era of instant payments.
