Cyber Insurer sued after company loses $480K in CEO Fraud

A Texas-based engineering firm, Ameriforge Group Inc. or popularly known as AFGlobal is suing its cyber insurance provider, Federal Insurance Co., a division of insurance giant Chubb Group for refusing to cover a $ 480,000 loss following an email scam that impersonated the firm’s chief executive.

AFGlobal claims of having the papers to prove that scammers impersonating AFGlobal’s CEO convinced the company’s accountant to wire $ 480,000 to Agricultural Bank of China.

According to documents filed with the U.S. District Court in Harris County, Texas, the policy covered up to $3 million, with a $100,000 deductible. The documents indicate that from May 21, 2014 to May 27, 2014, AFGlobal’s director of accounting received a series of emails from someone claiming to be Gean Stalcup, the CEO of AFGlobal.

After the demand was fulfilled, the email sender then asked for an additional $ 18 million.

The firm expects some payout from its insurer for this incident but the insurer expects all this to go away.

CEO Fraud schemes are an increasingly common and costly form of cybercrime. According to the FBI, thieves have stolen nearly $750 million in such scams from more than 7,000 victim companies in the U.S. between October 2013 and August 2015.

The chief financial officer of one of New Zealand’s largest learning institutions had left her job after falling for an email “whaling” scam.

The executive director of finance at Te Wananga o Aotearoa, Bronwyn Koroheke, transferred $US 79,000 ($118,000) to an offshore bank account after receiving an email which appeared to be from her chief executive Jim Mather telling her to send the money which was actually sent from Chinese-based fraudsters running a whaling scam.

In such a scenario, the FBI has urged businesses to adopt two-step or two-factor authentication for email, where available, and/or to establish other communication channels such as telephone calls to verify significant transactions. Businesses are also advised to exercise restraint when publishing information about employee activities on their Web sites or through social media.

Source: KrebsOnSecurity

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