An unnamed company in Hawaii lost over $8.2 million to scammers just days before Christmas in 2023, according to a lawsuit seeking forfeiture of a portion of the funds recovered by federal agents from a Florida credit union.

The government’s civil forfeiture lawsuit filed in Honolulu’s Federal District Court did not name the company, which is referred to only as “Company #1”, but said it had fallen victim to a “business email compromise,” or “BEC” in which the as-yet-unknown scammers sent an email to the company’s representative that pretended to be from its outside legal counsel.

The phony email successfully spoofed the law firm’s email address, and the company’s representative then followed instructions and wired $8,328,651 from First Hawaiian Bank to Regions Bank, which is headquartered in Birmingham, Alabana, and operates in 15 states, from Florida to Iowa and Texas.

First Hawaiian Bank had issued a warning about business email fraud two years ago in July 2022 (“Business Email Compromise (BEC) is on the Rise“).

Business email fraud is a basic form of internet fraud, according to the FBI’s 2023 Internet Crime Report.

In 2023, the IC3 received 21,489 BEC complaints with adjusted losses over 2.9 billion. BEC is a sophisticated scam targeting both businesses and individuals performing transfers of funds. The scam is frequently carried out when a subject compromises legitimate business email accounts through social engineering or computer intrusion techniques to conduct unauthorized transfers of funds.

These BEC schemes historically involved compromised vendor emails, requests for W-2 information, targeting of the real estate sector, and fraudulent requests for large amounts of gift cards. More recently, the IC3 data suggests fraudsters are increasingly using custodial accounts held at financial institutions for cryptocurrency exchanges or third-party payment processors, or having targeted individuals send funds directly to these platforms where funds are quickly dispersed.

The complaint provides no information about the company targeted by the scammers, the nature of its business, or its interests and operations in Hawaii.

The account where the money was wired was associated with “Subsidiary Trading JR LLC,” a Florida company registered to do business by Jonathan Ryall Patton in October 2023. Prior to receipt of the money wired from First Hawaiian Bank, the account had a balance of just $59.23, the lawsuit reports.

“Numerous outgoing wires and checks were subsequently issued” from the account, including several checks made out to Patten that totaled over $4.4 million.

The account was totally drained and closed by January 24, 2024, just 33 days from the date of the original wire.

Federal investigators found and interviewed Patton in February. He set up the Regions Bank account at the direction of a woman he met through an online dating site. The woman, who he knew as “Mahina Mclaurin,” supposedly lives in the Philippines.

She allegedly told Patton she operated a business renting luxury cars that served as the middle man between the renters and the car rental company, but now “wanted to start her own business and bring her clientele with her.”

Patton told investigators he thought that the funds distributed from the Regions Bank account were used by Mclaurin to “buy cars.”

At some point, Regions Bank closed Patton’s account and refused to do further business with him. He then transferred about $4.4 million into a new account at Heartland National Bank, followed by quick transfers to an account at Crews Bank and Trust, and finally to MIDFLORIDA Credit Union.

The MIDFLORIDA account was opened on January 16, 2024 with a cashiers check for $1,084,947.01 from Heartland National Bank, with a notation that the HNB account had been closed. Another cashier’s check for $1.7 million drawn on Crews Bank and Trust was deposted on February 9, 2024.

On March 28 2024, Magistrate Judge Rom Trader approved a warrant authorizing seizure of all funds remaining in the MIDFLORIDA account. The seizure warrant was executed the same day. At that point, the account held $2,606,046.54.

According to the government’s complaint:

The quick and multi-layered transfer of funds fraudulently obtained using a spoofed email address is a common practice in this type of BEC scheme. The malicious actor(s)/fraudster(s) behind the BEC scheme try to move and disperse the money before it can be traced and/or recovered. Based on information and belief, Patton and others–such as those that Patton was told to send money to—likely served as money mules to move the fraudulently obtained funds.

Money mules in these types of fraud schemes are individuals who transfer illegally acquired money on behalf of or at the direction of another. Criminals recruit money mules to move money electronically through bank accounts, in person, or through a variety of methods. Once received, the mule may wire the money into a third-party bank account; “cash out” the money received, possibly via several cashier’s checks, convert the money into a virtual currency, or conduct a combination of these actions.

Subsidiary Trading Jr LLC had no legitimate business purpose and was used only to move fraudulently obtained funds as set forth above.

Patton is cooperating fully with federal investigators.

A search of the federal courts’ PACER computer system found no criminal or civil cases involving Patton or anyone named Mahina Mclaurin. However, a Jonathan Ryall Patton filed for divorce from his wife in a local court in Highlands, Florida, on October 12, 2022, according to the online service UniCourt.com.

Company #1 remains unidentified.

The FBI’s 2023 Internet Crime Report ranked business email compromise as the second most costly type of fraud. Only fraudulent investment schemes resulted in greater losses, out of more than two dozen typtes of internet scams.

Hawaii ranked #13 among the 50 states and the District of Columbia in internet fraud losses per capita, with $3,603,978 lost per 100,000 citizens, with total internet crime losses of $51,722,052, according to the FBI report.