A New York state court has denied a motion to dismiss a fraud lawsuit filed by Attorney General Letitia James against the operator of a peer-to-peer payment network.
The ruling, issued on July 20, allows the case to proceed under New York Executive Law § 63(12), which gives the Attorney General broad powers to pursue repeated fraudulent or illegal business conduct.
The lawsuit was originally filed in August 2025, following the CFPB’s dismissal of a federal action involving substantially similar allegations against the same operator.
At the heart of the complaint is the allegation that the operator launched its payment network without adequate safeguards to prevent scammers from impersonating legitimate businesses and accessing consumer accounts.
The Attorney General further contends that despite being aware of fraud occurring through the network, the operator continued to market the service as “safe,” “secure,” and “backed by the banks.”
The court found that the complaint plausibly alleged 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 operator had argued that its safety and security statements amounted to nonactionable opinions or general advertising claims, a position the court declined to accept at this stage.
The court determined that those statements must be assessed in the context of how the service was presented to consumers, including through its integration into participating banks’ mobile applications.
The ruling does not constitute a finding that the operator actually violated the law, but rather confirms that the Attorney General has alleged sufficient facts for the case to move forward.
The decision represents a novel application of New York’s broadly worded anti-fraud statute to the design, operation, and marketing of a digital payment network, with potentially significant implications for the fintech sector.
Legal analysts note the case reflects a broader pattern of increased state-level scrutiny of digital payment products and the fraud-prevention controls companies use to identify suspicious activity, warn consumers, and restrict bad actors.
With federal regulators having stepped back from pursuing the matter, the New York Attorney General’s office is now leading the charge on holding payment network operators accountable for the fraud risks embedded in their platforms.