Cybersecurity and Data Breaches

October 12, 2022

The owner of popular fashion ecommerce websites SHEIN and ROWME, Zoetop Business Company, Ltd., has agreed to pay $1.9 million to settle charges that it failed to properly safeguard consumer information, failed to protect accounts impacted by a data breach, and downplayed the extent of the breach to consumers.  In June 2018, attackers stole the names, email addresses, hashed passwords, and credit card information of 39 million SHEIN consumers worldwide, but Zoetop failed to alert more than 32.5 million of them that their login credentials had been compromised.  Two years later, Zoetop discovered that 7 million ROWME consumers were also affected.  AG NY

October 4, 2022

Sebastian Vachon-Desjardins, a Canadian man who participated in a ransomware attack that affected victims around the world—including companies, municipalities, emergency services, hospitals, law enforcement, school districts, and higher education institutions—has been sentenced to 20 years in prison and ordered to forfeit $21.5 million; a restitution order will be issued at a later date.  According to the government, Vachon-Desjardin’s NetWalker ransomware had taken advantage of the COVID-19 pandemic to specifically target organizations in the healthcare sector.  USAO MDFL

September 20, 2022

Morgan Stanley Smith Barney LLC (MSSB) has agreed to pay $35 million to the SEC to settle charges of failing to protect the personal identifying information (PII) of some 15 million customers.  Between 2015 to 2020, MSSB failed to properly encrypt PII or properly dispose of devices and servers containing PII.  As a result, decommissioned devices containing unencrypted PII were resold by a third party via an internet auction site, and 42 decommissioned servers containing unencrypted PII went missing entirely.  SEC

July 27, 2022

Three registered broker-dealers have been ordered to pay civil penalties based on SEC findings that each had deficiencies in its programs to prevent customer identity theft, in violation of the SEC’s Identity Theft Red Flags Rule, or Regulation S-ID.  J.P. Morgan Securities LLC will pay $1.2 million, UBS Financial Services Inc. will pay $925,000, and TradeStation Securities, Inc. will pay $425,000.  The SEC found that the broker-dealers’ cybersecurity policies failed to detect identity theft red flags in connection with customer accounts or to incorporate those red flags into their programs, and that the firms failed to adequately train staff, failed to review and update the policies as required, did not include appropriate board oversight, and failed to oversee service provider arrangements.  SEC

July 26, 2022

Wawa, Inc. agreed to an $8 million settlement for a 2019 data breach which occurred due to Wawa’s failure to deploy reasonable information security measures. Hackers accessed Wawa’s network and extracted sensitive customer information, impacting stores in 6 states and the District of Columbia. In addition to the payment, Wawa is required to implement new security practices to secure customers’ sensitive personal information, including providing resources necessary to implement their security program and providing security awareness and privacy training. FL AG, VA AG, NJ OAG

July 8, 2022

Aerojet Rocketdyne Inc., which provides propulsion and power systems for vehicles belonging to the Department of Defense and NASA, has agreed to pay $9 million to resolve a whistleblower lawsuit.  According to Brian Markus, a former employee, the company misrepresented its compliance with the cybersecurity requirements of contracts with those agencies, in violation of the False Claims Act.  For bringing a successful qui tam case, Markus will receive a relator’s share of $2.61 million.  USAO EDCA

June 23, 2022

Carnival Cruise Line has agreed to pay $1.25 million to 46 states following a data breach that revealed the personal information of approximately 180,000 employees and customers.  The company revealed in March 2020 that an unauthorized actor had gained access to the data, but it first became aware of suspicious activity nearly a full year before it reported the breach.  As part of the settlement, Carnival will be required to implement higher email security practices, implement and maintain a breach response and notification plan, and submit to an independent security assessment.  GA AG; NC AG; NY AG

May 25, 2022

Twitter will pay $150 million in civil penalties and implement new compliance measures to settle allegations of FTC Act violations by misrepresenting how it would deploy users’ nonpublic contact information, affecting more than 140 million Twitter users. From 2013 to 2019, Twitter collected users’ telephone numbers and email addresses under the guise of account security protocols, while concealing their secondary use of this information to help companies send targeted ads to consumers, which thereby increased Twitter’s primary source of revenue. In addition to the monetary penalty, Twitter is required to implement a new privacy and information security program and comply with numerous other reporting and record-keeping requirements. DOJ, USAO NDCA

March 8, 2022

Comprehensive Health Services LLC (CHS), a Florida-based contractor that provides medical services at government facilities in Iraq and Afghanistan, has agreed to pay $930,000 to resolve claims under the False Claims Act.  According to two separate qui tam cases filed in the Eastern District of New York, CHS falsely certified to the State Department and Air Force that it had complied with contractual cybersecurity requirements when, in fact, it had failed to to properly store patient medical records on a secure electronic medical record system, and had falsely represented that it used approved medical supplies when, in fact, it had relied on unapproved controlled substances from foreign sources.  DOJ; USAO EDNY; USAO MDFL