I'm a satisfied customer of IB. So far, I'm happy with the security aspects of IB platform. What happened to Robinhood users scare me. Has similar things happen to IB customers before? What's the risk of same thing happening to IB customers? What precautions should we take to minimise this risk?
https://www.bloomberg.com/news/arti...ad-accounts-looted-say-there-s-no-one-to-call
I have not read the full text of Bloomberg article, because they have a paywall, or else they want me to get out of private browsing, which I am not going to do. But I found this article at Gizmodo:
https://gizmodo.com/robinhood-hackers-stole-from-the-rich-and-gave-to-them-1845328723
Robinhood allows (or allowed) users to transfer funds to a bank account that had never before been linked to the brokerage account, without first verifying that the bank account belonged to the brokerage accountholder.
I would be willing to make a small wager that no other broker operating in the USA allows such transfers.
It also appears that Robinhood has no telephone customer service, and that at least one victim of the hackers tried to report a pending transfer that she had not authorized, and they failed to take action quickly enough, because the only way to communicate with customer service was through messaging.
Robinhood's position is that neither their network nor their mobile apps were hacked, and that the hackers gained access by hacking the users' e-mail accounts. And that may well be what happened.
But I think Robinhood may still have some serious liability here. Allowing transfers to an unverified bank account is a major weakness that should never have happened.
Whether any of the banks are liable is a different question. Have not had time to think about that. ACH transfers can often be reversed, but the process takes time.
Last year some online company pulled $30.00 out of my personal checking account using an ACH transfer. There was no hacking. Someone, somehow, somewhere, got hold of my routing number and account number, together with my name. And that's all they need to initiate an ACH withdrawal on some platforms. And banks will honor it. It was not a transfer. It was simply a
purchase. It was a fraudulent electronic check payment.
I reported it within a week or two, I think. I definitely reported within the time frame required by federal regs.
And I got my money back. But it took
more than a month.
ACH electronic transfers can be reversed precisely because they are electronic checks. And just like you can stop payment on a traditional paper check, you can also stop payment on an electronic check.
ACH electronic transfers are
not wire transfers. Sometimes that term is used incorrectly, even by people who work at banks for other financial institutions. A wire transfer is something else.
A wire transfer is cleared funds, immediately available on the other end. And with very few exceptions, a wire transfer cannot be reversed. Metaphorically, a wire transfer is more like an electronic
cashier's check.
The Robinhood activity was almost certainly ACH transfers and not wire transfers. They will be reversed. But it will take time for the banks to investigate.
BMK
