Photo by Frugal Flyer on Unsplash
Over the weekend, Chase Bank encountered a significant disruption due to a viral trend on TikTok that encouraged users to exploit what they believed was a "glitch" in the bank's ATM system. The so-called glitch was mistakenly believed to allow customers to withdraw funds from fake checks before they had cleared, creating the illusion of free money.
The original source of the glitch's exposure appears to be social media users who shared videos encouraging others to exploit what they mistakenly believed was a loophole in Chase Bank's ATM system. These videos claimed that by depositing fake checks, users could withdraw funds before the checks had cleared, effectively getting "free money." This misinformation quickly spread, gaining significant attention online before the bank intervened. However, this was not a glitch but a form of check fraud called Check Kiting, an age-old trick that has now found new life through social media.
Check Kiting
Check kiting is a type of bank fraud that involves exploiting the time delay between when a check is deposited and when the funds are actually withdrawn from the account on which the check is drawn. The perpetrator writes a check from an account with insufficient funds and deposits it into another account, knowing that the bank will credit the second account before the check clears. The fraudster then quickly withdraws the credited amount, essentially using non-existent funds.
This scheme relies on the "float time," or the period between the check being deposited and the funds being verified. By cycling between multiple accounts, the fraudster can create the illusion of having available funds, even though the checks are worthless. Check kiting is an illegal and federal crime as it is considered a serious form of fraud. It often results in criminal charges, including fines up to $1 million, up to 30 years in prison, civil charges from the bank, or other legal action, but can vary depending on the state and number of times the offense occurred.
Banks have implemented various measures to combat check kiting, such as reducing float times and increasing scrutiny on suspicious transactions.
Chase Bank’s Response
Chase Bank quickly responded to the issue by freezing the accounts of those who attempted to participate in the scheme. Additionally, Chase Bank began reversing transactions and warning customers of the legal consequences of participating in this fraudulent activity. Many users reported seeing their account balances plunge into the negative, with some owing as much as $40,000. The bank also imposed holds on these accounts, preventing further access to funds while reversing the fraudulent transactions.
This incident has drawn significant attention online, with financial experts warning about such actions' severe legal and financial consequences. Jim Wang, a financial educator, highlighted that any unexpected funds appearing in an account due to a bank error do not belong to the account holder, and spending that money could lead to [additional] serious repercussions.
Written by: Will Wight
Photo by Frugal Flyer on Unsplash
