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On July 20, a New York state court denied a motion to dismiss New York Attorney General Letitia James’ lawsuit alleging that the operator of a peer-to-peer payment network violated New York Executive Law § 63(12). The New York AG alleges that the operator failed to address known fraud risks and made misleading representations regarding the network’s safety and security.
The Attorney General filed the lawsuit in August 2025 after the CFPB dismissed a federal action involving similar allegations. According to the complaint, the operator launched the network without safeguards sufficient to prevent scammers from impersonating legitimate businesses and gaining access to consumer accounts. The Attorney General further alleges that the operator continued marketing the service as “safe,” “secure,” and “backed by the banks,” despite its knowledge of fraud occurring through the network.
In declining to dismiss the case, the court emphasized the broad scope of Executive Law § 63(12), which authorizes the Attorney General to pursue repeated fraudulent or illegal business conduct. The court concluded that the complaint plausibly alleged that the operator knowingly created an environment conducive to recurring fraud by failing to impose meaningful consequences on users known to be engaged in fraudulent activity. The court also permitted the Attorney General’s deceptive-marketing theory to proceed. Although the operator argued that its safety and security statements were nonactionable opinions or general advertising claims, the court determined that the statements must be considered in the context of how the service was presented to consumers, including its integration into participating banks’ mobile applications.
The decision does not determine that the operator violated the law. Rather, the court held that the Attorney General alleged facts sufficient for the case to proceed.
Putting It Into Practice: The ruling allows the Attorney General to pursue a novel application of New York’s broadly worded anti-fraud statute to the design, operation, and marketing of a digital payment network. More broadly, the case reflects continued state scrutiny of payment products and the fraud-prevention controls used to identify suspicious activity, warn consumers, and restrict bad actors, (previously discussed here).
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