In the early morning of a Thursday in January, more than $17 million of funds disappeared from the escrow account of a prominent real estate law firm in Palm Beach. Now, the law firm is suing the bank for the unrecovered funds, according to a lawsuit obtained by The Real Deal.
Attorneys Guy Rabideau and David Klein’s Rabideau Klein sued First Horizon Bank this week, alleging the bank violated state law governing fund transfers, breach of contract and negligence.
The firm handles deals for some of Palm Beach’s wealthiest clients. A quick Google search shows articles covering real estate deals the practice was involved in for tens of millions of dollars on the island.
Palm Beach-based Rabideau Klein was able to recover $10.7 million of the $17.3 million lost, but about $6.5 million remains outstanding, and it wants the bank to refund the money, with interest.
The lawsuit alleges failure after failure on the part of First Horizon. A “bad actor” was able to send 13 unauthorized wire transfers as a result of the bank’s actions, omissions and security failures, according to the complaint. These failures, the firm says, created catastrophic financial and operational harm because the account was holding escrowed funds for its clients and others involved in real estate deals.
Rabideau Klein’s attorney, Anthony Yanez of Hodgson Russ, declined to comment.
A spokesperson for First Horizon did not respond to a request for comment.
Rabideau Klein alleges that an unknown third-party “threat actor” was able to gain unauthorized access to the law firm’s bank account through First Horizon’s online banking platform, changing user passwords, creating a new user ID associated the account, disabling other user accounts and even successfully calling the bank’s customer service center to request a new RSA security token.
This “threat actor” claimed to be Rabideau, and said he had needed the bank to reissue the security token. After the bank employee asked this person for an account or card number, they responded with “their” instead of “my”: “‘Okay, uh, their account number, um, one moment, that would be . . .,’” according to a recording of the call obtained by Rabideau Klein during their investigation.
During that password reset process, First Horizon even provided this threat actor with Guy Rabideau’s user ID, which this person then used to reset Rabideau’s login.
The bank, the lawsuit states, “failed to act and prevent the fraudulent wire transfers by ignoring numerous and glaring red flags that should have alerted even minimally attentive bank personnel to the fact that [Rabideau Klein’s bank account] was under malicious attack.”
Rabideau Klein alleges that First Horizon put a bullseye on the law firm, handed these bad actors a bow with arrows, and “then watched as the arrows struck [the firm] in rapid succession without taking any action to stop the attack.”
The law firm opened an account with the bank when it was a branch of Lydian Private Bank. Following several mergers, First Horizon took over in 2020 after merging with Iberiabank. First Horizon is among the 40 largest insured banks in the U.S. with more than $80 billion in assets.