Fraudsters hack contractor’s email, defraud Greater Sudbury out of $1.5M

Greater Sudbury is hoping to recover $1.5 million it believed it was sending to a city contractor, but actually landed in the hands of scam artists.

It emerged later that the contractor’s email had been hacked and the fraudsters managed to convince staff at Greater Sudbury that the business had new banking information.

The city accepted the new bank info and sent payment, unaware they weren’t dealing with the actual contractor.

The project in question is the troubled Lorraine Street transitional housing project. The contractor who was doing the work, Nomodic Modular Structures, went bankrupt and the work was then given to Flex Modular last November.

But in December, the email of a senior project manager at Flex was hacked. Using the manager’s email address, the fraudsters sent the city a message claiming that they changed banks and that all funds should be sent to the new account.

“The email included the entire legitimate email chain referred to above and included all of the same documents previously submitted by (the project manager),” the city said in court documents.

Subsequent emails from the city were intercepted by the fraudsters and on Dec. 21, the city sent a payment of $1.5 million that was deposited in the fraudster’s account.

When Flex complained a week later that they hadn’t received payment, the city realized what had happened. It moved to freeze the account and began legal proceedings to recover the money.

The court action seeks to have the banks disclose information needed to trace the money and find out who is responsible for the fraud.

Fraud was noticed quickly

“The illegal activity was caught quickly by staff, and we are confident that we will be able to recover the majority of these funds,” the city said in a statement Thursday.

“The process to recover these funds is lengthy and involves several outside agencies, such as the contractor, our insurer, banks and courts. We are very thankful for the quick and supportive actions from these partners, and from the police.”

Fraud attempts are getting more complex and the number of victims is growing, the city said.

“Municipalities, just like residents, are faced with complex issues of fraud,” the statement said.

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“While we proactively work to prevent these types of occurrences, and are continuously evaluating and implementing changes to address them, fraud events are becoming increasingly sophisticated.”

The Greater Sudbury Police Service is investigating, “and we are performing a detailed internal review of the matter,” the statement said.

“The timelines for the Lorraine Street project completion are unaffected and work continues.”