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Local businessman suing bank over loss of nearly $330,000 in online theft
Date published: 2/7/2009
John Cheatwood calls himself a poster boy for the risks of online banking, and his story is indeed a scary one.
In early January 2007, someone somehow hacked into his business account at a Warrenton bank and removed more than $781,000 in two separate transactions.
Alerted by the first hack, Cheatwood discovered the second transaction early and had the money frozen at the Detroit bank to which it had been wired.
He got that $452,540 back, but the first amount wired, $328,540, has not been recovered. His bank, BB&T, has refused to make good on the loss.
Cheatwood, a Fauquier County native who now also has an office and holdings in Stafford County, said he has spent two years trying to get his money back without success.
On Jan. 5, the businessman filed suit in federal court in Alexandria asking that a judge force BB&T to return the $328,540 he claims was lost because of poor bank security.
The suit also seeks $1 million in punitive damages, plus legal and investigative fees.
The story begins in 2004, when, at the height of the real-estate frenzy, Cheatwood founded Closing Connection, a real-estate settlement and title business.
On Jan. 8, 2007, Cheatwood said, he got a call from BB&T informing him that a $328,540.79 wire transfer had been sent "by unknown parties" to a Detroit bank and that his account was overdrawn.
"I didn't know why it had occurred, but I had to cover it," Cheatwood said.
To do so, he had to take out a large loan.
While Cheatwood and the bank were trying to get to the bottom of the first wire, those responsible struck again.
"Ten days later, my secretary, who happened to be going over the account at the time, called me and said, 'Here's a wire and I didn't do it,'" Cheatwood said. "She actually watched it go out."
This time, Cheatwood was able to get to the bank and have the transfer intercepted before the money could get to its final destination. He said the online transaction was halted at the Fifth Third Bank in Bloomington Hills, Mich., just outside Detroit.
Thus began a long investigation by the Secret Service to try to find out who hacked into Closing Connection's bank account and how they did it.