State AG Updates: Arizona, Texas, California, North Carolina, Washington, New York and an AG Coalition

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In this edition of Faegre Drinker’s State Attorneys General Update, we discuss:

Arizona AG Enters $85 Million Settlement With Google for Alleged Improper Use of Consumer Location Data

Google agreed to an $85 million settlement for alleged violations of Arizona’s Consumer Fraud Act. Specifically, the Arizona AG alleged that Google violated the Act by building “coercive design tactics used to manipulate users’ behavior,” known as “dark patterns,” into its Android phone software. In this instance, the AG alleged that Google created misleading settings, so even if a consumer turned off location tracking in the “Location History” menu, location data would still be tracked and used to sell advertisements through other settings — specifically, the “Web & App Activity” menu.

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Sixth and Second Circuits Rule In Favor of Insurance Policy Holders in Computer Fraud Provisions Cases

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Policy holders alleging that computer fraud provisions of their insurance policies extended to fraud that stemmed from an intercepted email and a spoofing attack notched wins before two separate appellate courts recently. The first involves Travelers Casualty and Surety of America and American Tooling Center Inc., and the second involves Chubb Ltd. and Medidata Solutions Inc.

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Ninth Circuit Rules in Travelers Case, Involving Social Engineering Fraud and Cyber Insurance

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The 9th U.S. Circuit Court of Appeals affirmed the district court’s ruling in Aqua Star (USA) Corp., vs Travelers Casualty and Surety Company of America. The case involved fraudulent emails purporting to be from the insured’s suppliers directing that the insured direct its payments to a new account purportedly opened by that supplier. Based on that fraudulent communication, the insured transferred $713,890 due its supplier to the fraudulent “new account.”

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Social Engineering Fraud and Cyber Insurance – Are You Covered?

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Spoofing and phishing are part of what is known as social engineering fraud. Social engineering fraud is typically a type of computer fraud where an employee is misled into believing he or she is communicating with a vendor and is tricked into sending money due that vendor to the fraudster. Many organizations take proactive measures to protect themselves through enhanced IT measures, employee training and the purchase of computer fraud and other types of cyber insurance.

A recent district court action in Washington illustrates how social engineering works and highlights the importance of understanding the limitations of the types of insurance coverages companies may have. The case is currently on appeal before the 9th U.S. Circuit Court of Appeals.

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DOJ Announces Federal Indictment in Massive Cyberfraud Enterprise

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The Department of Justice announced the unsealing of a federal indictment charging 36 individuals for their alleged roles in the Infraud Organization, an Internet-based cybercriminal enterprise that is alleged to have engaged in a large-scale cyberfraud.   The indictment alleges that the enterprise caused more than $530 million in actual losses to consumer, businesses, and financial institutions.

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