UMB Bank is being sued by a Utah public financing district whose complaint alleges that UMB should have known wire instructions it received from hackers were fraudulent.
UMB disclosed the lawsuit in
The Series 2024 bonds were issued in connection with improvements involving developer Fiddlers Canyon Hills, UMB said in its notice posted to the Electronic Municipal Market Access website, which said the complaint could be found on the Third Judicial District Court in Salt Lake County for the State of Utah docket and provided a case number.
Based on the case number, a spokesperson for Utah State Courts provided a copy of the complaint, which she said was filed on July 11. The complaint listed Fiddlers Canyon Hills Infrastructure Financing District as the plaintiff.
"As a national banking institution with branch locations throughout the nation, UMB is well acquainted with business email compromises, wire transfer fraud, and other forms of [banking] fraud," the complaint said.
According to the complaint, on or around Dec. 17, 2024, UMB emailed Fiddlers Canyon representatives "seeking completion of a form to 'provide standing wire instructions for any funds to be sent to the district for reimbursement.'"
UMB sent a follow-up email the next day, indicating that it had received the first requisition for payment in the amount of $5.2 million, the complaint said. In the same email, UMB indicated "that it would 'need to verbally verify the payee and the payment instructions' before disbursing payment in connection with the requisition request," the complaint said.
"As a direct and proximate result of UMB's breaches of its fiduciary duties, Fiddlers
Canyon has suffered damages in an amount to be determined at trial but in no event less than $3,858,917.13," the complaint said.
While Fiddlers Canyon representatives completed the form with the correct wire instructions, Fiddlers Canyon representatives later learned that their email system had been compromised, according to the complaint.
"Shortly after Fiddlers Canyon sent the correct wire instructions, the hackers that had compromised the email system and accounts sent spoofed emails from the mailboxes of various representatives of Fiddlers Canyon," the complaint said.
The spoofed emails asked for changes to the wire instructions including a request to UMB that the funds be sent to a new account that didn't belong to Fiddlers Canyon or its affiliates, the complaint said.
"UMB should have known that the fraudulent wire instructions it received from the hackers were fraudulent," the complaint said. "For example, the fraudulent wire instructions were dated more than seven months before they were provided to UMB."
The phony wire instructions also identified a bank account in New Mexico unassociated with the payee making the requisition request, the complaint said.
"UMB knew that the entity making the requisition project was a Utah LLC performing work in connection with a development project located in Utah," the complaint said, adding that the fraudulent wire instructions also used a routing number for Citizens Bank associated with the State of New York rather than New Mexico.
"The fraudulent wire instructions came from representatives of Fiddlers Canyon
directly, as opposed to legal counsel for Fiddlers Canyon," the complaint said. "It is standard practice for counsel to submit requisition requests on behalf of clients."
Finally, the complaint said, the phony wire instructions included a verification telephone number "that is a telephone number associated with an escort and related website known as
'Erotic Monkey,'" the complaint said.
"Despite the plethora of red flags, UMB wired the requisitioned amount based on
the fraudulent wire instructions," Fiddlers Canyon's complaint said.
In its notice, UMB said that upon being made aware of the fraudulent wire instructions, "the trustee used all available measures to it to attempt to recoup funds wired out per the fraudulent wire instructions."
"The trustee has exhausted those attempts as of the date of this notice," UMB said in the EMMA notice. "Additionally, the trustee contacted the issuer and developer and made multiple attempts with the two parties to achieve a remedy to the situation in order to fully fund the construction fund to the amount prior to the requisition payment."
Despite those efforts, "no resolution of this matter has been reached as of the filing of a lawsuit by the issuer," the notice said.
"The trustee through counsel has responded to the lawsuit and continues to work on behalf of the holders relating to this situation," UMB said in the notice.
