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MyPayrollHR CEO Arrested, Admits to $70M Fraud

401 points by headalgorithm 7y ago

pstuart 7y ago
I'm surprised he got away with it for as long as he did.
certmd 7y ago
Matt Levine's take from a few days ago. As usual, humorous and insightful. https://www.bloomberg.com/opinion/articles/2019-09-24/don-t-steal-the-payrolls https://www.bloomberg.com/opinion/articles/2019-09-24/don-t-...
- braythwayt 7y ago
  Is there a non-paywall way to read this?
  - SpikedCola 7y ago
    https://pastebin.com/xeUmgmkR https://pastebin.com/xeUmgmkR
    - braythwayt 7y ago
      Thank you!
  - dudus 7y ago
    You can subscribe to this newsletter and get the full texts by email
  - mcintyre1994 7y ago
    He sends the full articles on his mailing list - the link is at the bottom of that article but if that's behind the paywall too it's here: https://link.mail.bloombergbusiness.com/join/4wm/moneystuff-signup https://link.mail.bloombergbusiness.com/join/4wm/moneystuff-...
  - stefan_ 7y ago
    Outline works: https://outline.com/ktXMjW https://outline.com/ktXMjW The easiest, though, is to simply subscribe to his newsletter, which has all the articles in full. There is rarely an edition I find myself immediately archiving.
  - bwan 7y ago
    You should be able to read it by disabling javascript.
- devchix 7y ago
  I love it this part: "The guy with a button that says “Steal $30 Million of Paychecks” doesn’t press it the first chance he gets. That would be stealing! He is a moral human being, he has standards, he stays well away from that button even if he is also simultaneously running a bunch of complicated frauds. You can look yourself in the eye when you’re running a complicated fraud;" He's bang on. I'm curious what his "other companies" were, that they became a source of such financial pressure. One would think a payroll middleman has the easiest job in the world next to printing money. Companies put money in the kitty, you disburse the monies to other parties and take a cut. HN crew could probably set up an event-sourced system with Lambda to automate it all. 8000 employees, that does not seem like a lot?
  - speby 7y ago
    > One would think a payroll middleman has the easiest job in the world next to printing money. Companies put money in the kitty, you disburse the monies to other parties and take a cut. HN crew could probably set up an event-sourced system with Lambda to automate it all. 8000 employees, that does not seem like a lot? Oh falling into the "could built it in a weekend" trap? Go right ahead, start a payroll company from scratch that can correctly pay, with proper auditing, checks and balances, any employee in the US (nevermind international) as quickly as possible, deal with wage garnishments, special deductions (401Ks, IRAs, FSA, HSA, and so on, part-time hourly and full-time salaried, bonuses with net-to-gross and gross-to-net, commissions for sales people along with "draw").... annnnnnnnd go!
    - devchix 7y ago
      Wage garnishments! Nobody mentioned anything about wage garnishments! :washes hands: Heh, I beg your indulgence for my cheeky comment, I of course know nothing of this matter, it seems easy, as all those task you mentioned can be converted to single rules. Not a weekend worth of work, but perhaps 20 weeks worth of work for a prototype?
      - djrogers 7y ago
        > it seems easy, as all those task you mentioned can be converted to single rules. Single rules, yes. For each State in the US. And every other country in the world. And that can change at any time of the year. Oh, and nobody form those various state and federal government agencies are reaching out to tell you when and what is cahnging. And GP just listed a few things off the top of his head - there are literally hundreds of complexities in doing this that he glossed over...
tempsy 7y ago
$200k bail seems low for the crime. He tried to disappear - why offer bail?
- crb002 7y ago
  It was his house and cars. Doesn't seem unreasonable under the assumption he is innocent.
  - toomuchtodo 7y ago
    He confessed to the crimes (per Bloomberg's piece referenced by certmd in this thread).
    - SkyBelow 7y ago
      He still hasn't been found guilty and thus the courts should treat him as innocent. There is no shortage of innocent people who plea guilty for any number of reasons so the court cannot just automatically accept the plea and must go through specific motions to do so (I would even argue those motions don't go far enough to protect innocent people from being coerced into a guilty plea).
- throwaway_law 7y ago
  You are generally entitled to bond, unless there you are: a) a danger to the community; or b) a flight risk. Obviously, if he tried to "disappear" previously you could argue that, but now his passport has been confiscated. And usually the higher profile you are the easier it is to argue you aren't a flight risk.
  - pbhjpbhj 7y ago
    Because someone perpetrating massive frauds, or whatever, couldn't buy a fake passport and hire a private plane to a non-extradition territory?? /s If there's any indication a perp might fly then you should keep them inside, passport or no.
crb002 7y ago
+1 for surety bail bond. "Cash Only" bonds are a racket for bail bondsmen.
- rwmurrayVT 7y ago
  I got railed. The postal inspectors stated in court that they wanted me released the day of my arrest. The judge still gave me $50k bail. Keep in mind I was 24 years old and made $55k annually with a net worth of about... $25k and most of that being in my personal vehicle. What they also don't tell you is how difficult it is to find a federal bail bondsmen. I called every where in the Hampton Roads area to no avail. I ended up being rescued by one from several hours away. $9,500.... never to be seen again.
  - Consultant32452 7y ago
    Would you mind helping me understand this better? My understanding is that bond from a bail bondsman works kind of like a loan. The bail bondsman puts up the money ($50k in this case) and if you show up to court he gets his $50k back. This works kind of like a loan between you and the bondsman, I would expect you to pay some amount on the total, something akin to extremely high risk loan interest, but $9,500 is almost a quarter. Is that a standard rate for a bond?
    - benjohnson 7y ago
      The fee or 'premium' for most bonds in various jurisdictions in the USA is typically between 10% to 15% of the bond value. His while his fee of $9,500 is slightly higher than most, it's not a surprise.
      - dbancajas 7y ago
        wow. how can I be one? seems very lucrative.
        vonmoltke 7y ago
daenz 7y ago
>Check-kiting is the illegal act of writing a check from a bank account without sufficient funds and depositing it into another bank account, explains MagnifyMoney.com. “Then, you withdraw the money from that second account before the original check has been cleared.” Can someone explain why banks don't have systems in place to detect this kind of fraud? It seems like even the most minimal communication between banks would help detect it.
- rwmurrayVT 7y ago
  This will not work well unless the bank account has some age to it and previous transactions. They are legally required to make $200 available immediately. Most major banks will clear it all to you overnight after 30 days if you deposit it in time for the ACH to process overnight. That will require the account it is written from to actually have the funds in the account.
- noir_lord 7y ago
  Because in some parts of the world banking is a historical pile of hacks on hacks on hacks held together with bailing wire and twine. Also banking is a hugely complex problem involving two of the hardest things to deal with, money and people. It's particularly the case where you have a lot of small banks geographically spread out running a variety of legacy systems all of which talk to each other in weird and whacky ways. I'm surprised kiting still works though.
  - hsk823 7y ago
    Let's be honest. Many enterprises and business processes are hack upon hack all held together with duct tape and glue.
  - nunja 7y ago
    It would be amazing if someone could come with a useful technology that solves this particular set of problems. Something like a public distributed ledger where all transactions are validated by a majority of actors in a trustless system ... oh wait.
dmix 7y ago
I'm trying to make sense of the scheme here, I understand he used the money to fake business income to make loans. But what was the end game? I'm guessing he thought he'd make enough money off the loans by "buying businesses" that he could pay back the millions he was borrowing? Or did he just hope to Ponzi the various loans for as long as possible? The next bigger one pays off the last one type of thing.
- braythwayt 7y ago
  You used the magic word, "Ponzi:" https://en.wikipedia.org/wiki/Charles_Ponzi https://en.wikipedia.org/wiki/Charles_Ponzi Not only did Ponzi bring this scheme (which is far older than him) to the public's attention, but he also "got in over his head." He wound up running the scheme far longer than he wanted or needed, for the (correctly divined) fear of it suddenly collapsing. A similar thing happened with Bernie Madoff, if his account is given credence: https://en.wikipedia.org/wiki/Bernard_Madoff https://en.wikipedia.org/wiki/Bernard_Madoff
- deleted 7y ago
  [deleted]
usaphp 7y ago
From the article: “... a person could open checking accounts at bank A and bank B, at first depositing $500 into bank A and nothing in bank B. Then, they could write a check for $10,000 with account A and deposit it into account B. Bank B immediately credits the account, and in the time it might take for bank B to clear the check (generally about three business days), the scammer writes a $10,000 check with bank B, which gets deposited into bank A to cover the first check. This could keep going, with someone writing checks between banks where there’s no actual funds, yet the bank believes the money is real and continues to credit the accounts.” I still don't understand how is it possible for a bank to not see a balance on another account right at the time they saw a check deposited? I mean it's not like they have to call someone to get a paper records of an account balance, it is all digital anyway, so why is there such a big delay?
- toomuchtodo 7y ago
  https://engineering.gusto.com/how-ach-works-a-developer-perspective-part-1/ https://engineering.gusto.com/how-ach-works-a-developer-pers... (How ACH works: A developer perspective - Part 1) https://engineering.gusto.com/how-ach-works-a-developer-perspective-part-2/ https://engineering.gusto.com/how-ach-works-a-developer-pers... (How ACH works: A developer perspective - Part 2) https://engineering.gusto.com/how-ach-works-a-developer-perspective-part-3/ https://engineering.gusto.com/how-ach-works-a-developer-pers... (How ACH works: A developer perspective - Part 3) https://engineering.gusto.com/how-ach-works-a-developer-perspective-part-4/ https://engineering.gusto.com/how-ach-works-a-developer-pers... (How ACH works: A developer perspective - Part 4) My note: The Federal Reserve is working on an ACH modernization program (Real-Time Gross Settlement [RTGS]) to move towards real time settlement. It is still several years off. Financial infrastructure requires the same cautious handling as say, air traffic control systems, when modernizing.
  - elliekelly 7y ago
    As someone who has sadly spent many hours of my life with my nose in the ACH regulations and trying to wrap my head around ACH ops I can confirm that the entire system makes zero sense for the modern world. Unfortunately, the system we’ve built up is so unbelievably & needlessly complex from both a legal perspective and a technology perspective that it’s hard for anyone to even make progress on the important stuff - like basic security. But the system is so interconnected and important that even “disruptive” new fintech companies are forced to find a way to get their tech to work with the ACH network rather than the ACH network figuring out how to modernize.
braythwayt 7y ago
Sidebar: As a long-time Raymond Smullyan fan, I was delighted to read the different article about Ghosn and Nissan and undisclosed compensation. Matt raised a Smullyan-esque question: If the act of prosecuting Ghosn meant that the undisclosed compensation would no longer be paid, does that mean that prosecuting the crime prevents the crime from occurring? I suppose the rational answer is that the crime is in the conspiracy to attempt to do the thing, not the successful carrying out of the thing, but still, it is amusing to imagine a crime that is only a crime if it isn't revealed to be a crime.
gravitas 7y ago
Question after reading comments here on how check-kiting works, does the promise of Zelle combat this technique? or is it just a fancy digital wrapper around ACH and is still vulnerable to check-kiting as a concept?
- kevin_thibedeau 7y ago
  Zelle uses ACH, though their faster front end process may combat kiting. Other banks are moving to RTP which will not use ACH for the actual money transfer.
  - altmind 7y ago
    You sure? There is more than one way to clear funds between banks. I remember banks using Fedwire between each other.
HenryBemis 7y ago
1) this guy will spend many years in prison > That action caused so much uproar from affected companies and their employees that Cachet ultimately decided to cancel all of those reversals and absorb that $26 million hit, which it is now trying to recover through the courts. 2) Cachet is as useless bank ran by useless apes that don't know the basics about banking, their internal audit must be a bunch of untrained monkeys. I have investigated financial frauds for quite a while, and removing the funds from the employees, is the best way to make them walk out and never come back. This story has so many holes, a $20m+ was diverted from a corporate account to a personal account and systems didn't go off??? I see on Catcher's website: "The World's Most Convenient ACH Payroll Processing Services" yups, well played Cachet!! Key word there is "convenient" which always makes me run to the opposite direction when it comes to financial services and security. That website needs a "military grade security" to be complete! Edit: I know my sarcasm is all the way to 11 but this story has has so many control points broken (or worse non-existent) for all these to happen, that I am getting a headache just by thinking of this story.
senderista 7y ago
Now that's what I call disrupting the payroll industry!
rags2riches 7y ago
I remember seeing my mother writing a check once. It must have been in the late eighties. I'm quite confident that nobody I know of my age has ever written check. That check floating is still a thing is quite amazing to consider.
- whyaduck 7y ago
  I saw someone write a check at a supermarket just a couple of weeks ago. I think it's the first time I've seen a checkbook in the wild in 5 or 10 years.
  - lanstin 7y ago
    My landlord four years ago set things up so that the cheapest and lowest-latency way to pay rent was to walk to his bank and deposit a check into his account. Kind of weird. Sometimes I have weird professional things I pay for that need checks (tax attorney, and some real estate stuff). Fortunately, my credit union will print 3 checks if I walk by and ask nicely. And they have Saturday hours.
    - mruts 7y ago
      I’ve always payed rent in cash. Landlords seem to like it more than checks.
- segmondy 7y ago
  I write checks. I like writing checks and I like cash. Online payments feel impersonal and doesn't hurt as much as the physical action of writing a check and cash. I'm more frugal when I spend cash. If I write a check for a large amount it physically hurts and causes me to try to figure out a way to eliminate or reduce the cause of such a large amount.
- scarejunba 7y ago
  Was surprised to see that the car dealership would accept personal cheques but I wrote one this week.
crappy-doo 7y ago
imagine that... shocking! ... or ... not...
senderista 7y ago
I just don't get why businesses are so afraid of outsourcing critical business functions like payroll to a random startup.
Keverw 7y ago
I feel bad for those people who Paychecks got stolen, I wonder if they'll end up getting that back or did already since it mentioned "briefly pull"... People who work paycheck to paycheck probably struggles the most and then overdraft fees, stress, couples often fight over money, etc... So pretty shameful if you are working hard, and stuff like this happens. You feel like you are doing everything right and things still go wrong. Even if they did put it back, still overdraft fees during that time if someone had a check cashed or automatic payment sent due to those funds being removed. I don't know why anyone would think they could get away with a fraud this large. I just think this stuff highlights how outdated the banking system is. I've always hated the idea of checks, I rather the money be gone right away then keeping track of it... Since checks still show on your balance even if not cashed yet. Then checks have your entire account number people could misuse. I have never wrote a check in my life though, but I know my family does for bills but I know more and more places have online bill pay... They trust mailing their entire account info than doing it online. However I feel both banking and the whole social security number thing needs to be rethought. it's insane you use the same number for everything and you pass it around to employers, contracting jobs freelancing or affiliate programs that pay commissions, credit cards, cable company, satellite tv, cell phone, doctors, dentists, etc. Well I know for doctors and stuff they say you can refuse to give it, but pretty sure they'll give you a hassle for exercising your rights. I know a while back there was some dentist storing patient information in a unsecured FTP account.
- jhawk28 7y ago
  the bank ended up taking the hit and is attempting to get the money back through litigation.
- jamesb93 7y ago
  It's pretty mental that the US still uses cheques for paying employees. I'm 26 and have never been given a cheque and all payments have been electronic.
  - Keverw 7y ago
    Yeah, a lot of places offer direct deposit. Then some employers even offer like some type of prepaid debit cards with your pay loaded on it, I guess for the unbanked.
gregmac 7y ago
Earlier discussion about the $35M fraud from a couple weeks ago: https://news.ycombinator.com/item?id=20941039 https://news.ycombinator.com/item?id=20941039
lovehashbrowns 7y ago
I read this article, the previous one, and this blog post that explains ACH: https://engineering.gusto.com/how-ach-works-a-developer-perspective-part-1/ https://engineering.gusto.com/how-ach-works-a-developer-pers... This is such a fun and interesting rabbit hole. And now I get how the whole thing worked from a computing perspective. I'm now just confused as to why the scam broke down the way it did. From my understanding, it seems that Pioneer was going to freeze his account (and they did). So in order to fix that issue, he temporarily diverted funds to his Pioneer account, settle debts(?), and continue trying to get money to cover the money he now owed to Cachet. But that doesn't make sense, does it? Because this fraud was going to be detected instantly (most likely) or ~3 days later. But that is nowhere near enough time to settle debts with Pioneer and get enough money to cover the Cachet debt. It seems to me like it was an extremely long Hail Mary that was likely never ever going to be successful.

401 points by headalgorithm 7y ago

I'm surprised he got away with it for as long as he did.

Matt Levine's take from a few days ago. As usual, humorous and insightful. https://www.bloomberg.com/opinion/articles/2019-09-24/don-t-steal-the-payrolls https://www.bloomberg.com/opinion/articles/2019-09-24/don-t-...

braythwayt 7y ago
Is there a non-paywall way to read this?
- SpikedCola 7y ago
  https://pastebin.com/xeUmgmkR https://pastebin.com/xeUmgmkR
  - braythwayt 7y ago
    Thank you!
- dudus 7y ago
  You can subscribe to this newsletter and get the full texts by email
- mcintyre1994 7y ago
  He sends the full articles on his mailing list - the link is at the bottom of that article but if that's behind the paywall too it's here: https://link.mail.bloombergbusiness.com/join/4wm/moneystuff-signup https://link.mail.bloombergbusiness.com/join/4wm/moneystuff-...
- stefan_ 7y ago
  Outline works: https://outline.com/ktXMjW https://outline.com/ktXMjW The easiest, though, is to simply subscribe to his newsletter, which has all the articles in full. There is rarely an edition I find myself immediately archiving.
- bwan 7y ago
  You should be able to read it by disabling javascript.
devchix 7y ago
I love it this part: "The guy with a button that says “Steal $30 Million of Paychecks” doesn’t press it the first chance he gets. That would be stealing! He is a moral human being, he has standards, he stays well away from that button even if he is also simultaneously running a bunch of complicated frauds. You can look yourself in the eye when you’re running a complicated fraud;" He's bang on. I'm curious what his "other companies" were, that they became a source of such financial pressure. One would think a payroll middleman has the easiest job in the world next to printing money. Companies put money in the kitty, you disburse the monies to other parties and take a cut. HN crew could probably set up an event-sourced system with Lambda to automate it all. 8000 employees, that does not seem like a lot?
- speby 7y ago
  > One would think a payroll middleman has the easiest job in the world next to printing money. Companies put money in the kitty, you disburse the monies to other parties and take a cut. HN crew could probably set up an event-sourced system with Lambda to automate it all. 8000 employees, that does not seem like a lot? Oh falling into the "could built it in a weekend" trap? Go right ahead, start a payroll company from scratch that can correctly pay, with proper auditing, checks and balances, any employee in the US (nevermind international) as quickly as possible, deal with wage garnishments, special deductions (401Ks, IRAs, FSA, HSA, and so on, part-time hourly and full-time salaried, bonuses with net-to-gross and gross-to-net, commissions for sales people along with "draw").... annnnnnnnd go!
  - devchix 7y ago
    Wage garnishments! Nobody mentioned anything about wage garnishments! :washes hands: Heh, I beg your indulgence for my cheeky comment, I of course know nothing of this matter, it seems easy, as all those task you mentioned can be converted to single rules. Not a weekend worth of work, but perhaps 20 weeks worth of work for a prototype?
    - djrogers 7y ago
      > it seems easy, as all those task you mentioned can be converted to single rules. Single rules, yes. For each State in the US. And every other country in the world. And that can change at any time of the year. Oh, and nobody form those various state and federal government agencies are reaching out to tell you when and what is cahnging. And GP just listed a few things off the top of his head - there are literally hundreds of complexities in doing this that he glossed over...

tempsy 7y ago

$200k bail seems low for the crime. He tried to disappear - why offer bail?

crb002 7y ago
It was his house and cars. Doesn't seem unreasonable under the assumption he is innocent.
- toomuchtodo 7y ago
  He confessed to the crimes (per Bloomberg's piece referenced by certmd in this thread).
  - SkyBelow 7y ago
    He still hasn't been found guilty and thus the courts should treat him as innocent. There is no shortage of innocent people who plea guilty for any number of reasons so the court cannot just automatically accept the plea and must go through specific motions to do so (I would even argue those motions don't go far enough to protect innocent people from being coerced into a guilty plea).
throwaway_law 7y ago
You are generally entitled to bond, unless there you are: a) a danger to the community; or b) a flight risk. Obviously, if he tried to "disappear" previously you could argue that, but now his passport has been confiscated. And usually the higher profile you are the easier it is to argue you aren't a flight risk.
- pbhjpbhj 7y ago
  Because someone perpetrating massive frauds, or whatever, couldn't buy a fake passport and hire a private plane to a non-extradition territory?? /s If there's any indication a perp might fly then you should keep them inside, passport or no.

crb002 7y ago

+1 for surety bail bond. "Cash Only" bonds are a racket for bail bondsmen.

rwmurrayVT 7y ago
I got railed. The postal inspectors stated in court that they wanted me released the day of my arrest. The judge still gave me $50k bail. Keep in mind I was 24 years old and made $55k annually with a net worth of about... $25k and most of that being in my personal vehicle. What they also don't tell you is how difficult it is to find a federal bail bondsmen. I called every where in the Hampton Roads area to no avail. I ended up being rescued by one from several hours away. $9,500.... never to be seen again.
- Consultant32452 7y ago
  Would you mind helping me understand this better? My understanding is that bond from a bail bondsman works kind of like a loan. The bail bondsman puts up the money ($50k in this case) and if you show up to court he gets his $50k back. This works kind of like a loan between you and the bondsman, I would expect you to pay some amount on the total, something akin to extremely high risk loan interest, but $9,500 is almost a quarter. Is that a standard rate for a bond?
  - benjohnson 7y ago
    The fee or 'premium' for most bonds in various jurisdictions in the USA is typically between 10% to 15% of the bond value. His while his fee of $9,500 is slightly higher than most, it's not a surprise.
    - dbancajas 7y ago
      wow. how can I be one? seems very lucrative.
      - vonmoltke 7y ago

daenz 7y ago

>Check-kiting is the illegal act of writing a check from a bank account without sufficient funds and depositing it into another bank account, explains MagnifyMoney.com. “Then, you withdraw the money from that second account before the original check has been cleared.” Can someone explain why banks don't have systems in place to detect this kind of fraud? It seems like even the most minimal communication between banks would help detect it.

rwmurrayVT 7y ago
This will not work well unless the bank account has some age to it and previous transactions. They are legally required to make $200 available immediately. Most major banks will clear it all to you overnight after 30 days if you deposit it in time for the ACH to process overnight. That will require the account it is written from to actually have the funds in the account.
noir_lord 7y ago
Because in some parts of the world banking is a historical pile of hacks on hacks on hacks held together with bailing wire and twine. Also banking is a hugely complex problem involving two of the hardest things to deal with, money and people. It's particularly the case where you have a lot of small banks geographically spread out running a variety of legacy systems all of which talk to each other in weird and whacky ways. I'm surprised kiting still works though.
- hsk823 7y ago
  Let's be honest. Many enterprises and business processes are hack upon hack all held together with duct tape and glue.
- nunja 7y ago
  It would be amazing if someone could come with a useful technology that solves this particular set of problems. Something like a public distributed ledger where all transactions are validated by a majority of actors in a trustless system ... oh wait.

dmix 7y ago

I'm trying to make sense of the scheme here, I understand he used the money to fake business income to make loans. But what was the end game? I'm guessing he thought he'd make enough money off the loans by "buying businesses" that he could pay back the millions he was borrowing? Or did he just hope to Ponzi the various loans for as long as possible? The next bigger one pays off the last one type of thing.

braythwayt 7y ago
You used the magic word, "Ponzi:" https://en.wikipedia.org/wiki/Charles_Ponzi https://en.wikipedia.org/wiki/Charles_Ponzi Not only did Ponzi bring this scheme (which is far older than him) to the public's attention, but he also "got in over his head." He wound up running the scheme far longer than he wanted or needed, for the (correctly divined) fear of it suddenly collapsing. A similar thing happened with Bernie Madoff, if his account is given credence: https://en.wikipedia.org/wiki/Bernard_Madoff https://en.wikipedia.org/wiki/Bernard_Madoff
deleted 7y ago
[deleted]

usaphp 7y ago

From the article: “... a person could open checking accounts at bank A and bank B, at first depositing $500 into bank A and nothing in bank B. Then, they could write a check for $10,000 with account A and deposit it into account B. Bank B immediately credits the account, and in the time it might take for bank B to clear the check (generally about three business days), the scammer writes a $10,000 check with bank B, which gets deposited into bank A to cover the first check. This could keep going, with someone writing checks between banks where there’s no actual funds, yet the bank believes the money is real and continues to credit the accounts.” I still don't understand how is it possible for a bank to not see a balance on another account right at the time they saw a check deposited? I mean it's not like they have to call someone to get a paper records of an account balance, it is all digital anyway, so why is there such a big delay?

toomuchtodo 7y ago
https://engineering.gusto.com/how-ach-works-a-developer-perspective-part-1/ https://engineering.gusto.com/how-ach-works-a-developer-pers... (How ACH works: A developer perspective - Part 1) https://engineering.gusto.com/how-ach-works-a-developer-perspective-part-2/ https://engineering.gusto.com/how-ach-works-a-developer-pers... (How ACH works: A developer perspective - Part 2) https://engineering.gusto.com/how-ach-works-a-developer-perspective-part-3/ https://engineering.gusto.com/how-ach-works-a-developer-pers... (How ACH works: A developer perspective - Part 3) https://engineering.gusto.com/how-ach-works-a-developer-perspective-part-4/ https://engineering.gusto.com/how-ach-works-a-developer-pers... (How ACH works: A developer perspective - Part 4) My note: The Federal Reserve is working on an ACH modernization program (Real-Time Gross Settlement [RTGS]) to move towards real time settlement. It is still several years off. Financial infrastructure requires the same cautious handling as say, air traffic control systems, when modernizing.
- elliekelly 7y ago
  As someone who has sadly spent many hours of my life with my nose in the ACH regulations and trying to wrap my head around ACH ops I can confirm that the entire system makes zero sense for the modern world. Unfortunately, the system we’ve built up is so unbelievably & needlessly complex from both a legal perspective and a technology perspective that it’s hard for anyone to even make progress on the important stuff - like basic security. But the system is so interconnected and important that even “disruptive” new fintech companies are forced to find a way to get their tech to work with the ACH network rather than the ACH network figuring out how to modernize.

braythwayt 7y ago

Sidebar: As a long-time Raymond Smullyan fan, I was delighted to read the different article about Ghosn and Nissan and undisclosed compensation. Matt raised a Smullyan-esque question: If the act of prosecuting Ghosn meant that the undisclosed compensation would no longer be paid, does that mean that prosecuting the crime prevents the crime from occurring? I suppose the rational answer is that the crime is in the conspiracy to attempt to do the thing, not the successful carrying out of the thing, but still, it is amusing to imagine a crime that is only a crime if it isn't revealed to be a crime.

gravitas 7y ago

Question after reading comments here on how check-kiting works, does the promise of Zelle combat this technique? or is it just a fancy digital wrapper around ACH and is still vulnerable to check-kiting as a concept?

kevin_thibedeau 7y ago
Zelle uses ACH, though their faster front end process may combat kiting. Other banks are moving to RTP which will not use ACH for the actual money transfer.
- altmind 7y ago
  You sure? There is more than one way to clear funds between banks. I remember banks using Fedwire between each other.

HenryBemis 7y ago

1) this guy will spend many years in prison > That action caused so much uproar from affected companies and their employees that Cachet ultimately decided to cancel all of those reversals and absorb that $26 million hit, which it is now trying to recover through the courts. 2) Cachet is as useless bank ran by useless apes that don't know the basics about banking, their internal audit must be a bunch of untrained monkeys. I have investigated financial frauds for quite a while, and removing the funds from the employees, is the best way to make them walk out and never come back. This story has so many holes, a $20m+ was diverted from a corporate account to a personal account and systems didn't go off??? I see on Catcher's website: "The World's Most Convenient ACH Payroll Processing Services" yups, well played Cachet!! Key word there is "convenient" which always makes me run to the opposite direction when it comes to financial services and security. That website needs a "military grade security" to be complete! Edit: I know my sarcasm is all the way to 11 but this story has has so many control points broken (or worse non-existent) for all these to happen, that I am getting a headache just by thinking of this story.

senderista 7y ago

Now that's what I call disrupting the payroll industry!

rags2riches 7y ago

I remember seeing my mother writing a check once. It must have been in the late eighties. I'm quite confident that nobody I know of my age has ever written check. That check floating is still a thing is quite amazing to consider.

whyaduck 7y ago
I saw someone write a check at a supermarket just a couple of weeks ago. I think it's the first time I've seen a checkbook in the wild in 5 or 10 years.
- lanstin 7y ago
  My landlord four years ago set things up so that the cheapest and lowest-latency way to pay rent was to walk to his bank and deposit a check into his account. Kind of weird. Sometimes I have weird professional things I pay for that need checks (tax attorney, and some real estate stuff). Fortunately, my credit union will print 3 checks if I walk by and ask nicely. And they have Saturday hours.
  - mruts 7y ago
    I’ve always payed rent in cash. Landlords seem to like it more than checks.
segmondy 7y ago
I write checks. I like writing checks and I like cash. Online payments feel impersonal and doesn't hurt as much as the physical action of writing a check and cash. I'm more frugal when I spend cash. If I write a check for a large amount it physically hurts and causes me to try to figure out a way to eliminate or reduce the cause of such a large amount.
scarejunba 7y ago
Was surprised to see that the car dealership would accept personal cheques but I wrote one this week.

crappy-doo 7y ago

imagine that... shocking! ... or ... not...

senderista 7y ago

I just don't get why businesses are so afraid of outsourcing critical business functions like payroll to a random startup.

Keverw 7y ago

I feel bad for those people who Paychecks got stolen, I wonder if they'll end up getting that back or did already since it mentioned "briefly pull"... People who work paycheck to paycheck probably struggles the most and then overdraft fees, stress, couples often fight over money, etc... So pretty shameful if you are working hard, and stuff like this happens. You feel like you are doing everything right and things still go wrong. Even if they did put it back, still overdraft fees during that time if someone had a check cashed or automatic payment sent due to those funds being removed. I don't know why anyone would think they could get away with a fraud this large. I just think this stuff highlights how outdated the banking system is. I've always hated the idea of checks, I rather the money be gone right away then keeping track of it... Since checks still show on your balance even if not cashed yet. Then checks have your entire account number people could misuse. I have never wrote a check in my life though, but I know my family does for bills but I know more and more places have online bill pay... They trust mailing their entire account info than doing it online. However I feel both banking and the whole social security number thing needs to be rethought. it's insane you use the same number for everything and you pass it around to employers, contracting jobs freelancing or affiliate programs that pay commissions, credit cards, cable company, satellite tv, cell phone, doctors, dentists, etc. Well I know for doctors and stuff they say you can refuse to give it, but pretty sure they'll give you a hassle for exercising your rights. I know a while back there was some dentist storing patient information in a unsecured FTP account.

jhawk28 7y ago
the bank ended up taking the hit and is attempting to get the money back through litigation.
jamesb93 7y ago
It's pretty mental that the US still uses cheques for paying employees. I'm 26 and have never been given a cheque and all payments have been electronic.
- Keverw 7y ago
  Yeah, a lot of places offer direct deposit. Then some employers even offer like some type of prepaid debit cards with your pay loaded on it, I guess for the unbanked.

gregmac 7y ago

Earlier discussion about the $35M fraud from a couple weeks ago: https://news.ycombinator.com/item?id=20941039 https://news.ycombinator.com/item?id=20941039

lovehashbrowns 7y ago

I read this article, the previous one, and this blog post that explains ACH: https://engineering.gusto.com/how-ach-works-a-developer-perspective-part-1/ https://engineering.gusto.com/how-ach-works-a-developer-pers... This is such a fun and interesting rabbit hole. And now I get how the whole thing worked from a computing perspective. I'm now just confused as to why the scam broke down the way it did. From my understanding, it seems that Pioneer was going to freeze his account (and they did). So in order to fix that issue, he temporarily diverted funds to his Pioneer account, settle debts(?), and continue trying to get money to cover the money he now owed to Cachet. But that doesn't make sense, does it? Because this fraud was going to be detected instantly (most likely) or ~3 days later. But that is nowhere near enough time to settle debts with Pioneer and get enough money to cover the Cachet debt. It seems to me like it was an extremely long Hail Mary that was likely never ever going to be successful.