MyPayRollHR, a payroll processing provider with about 4,000 small to mid-sized business customers, suddenly closed late last week. In response, the banking system went haywire and began taking funds from employees at many of these firms. Previously deposited pay was removed from their personal banking accounts, or “reversed.” Not once, but twice and there are reports that these withdrawals happened continuously. The checking account of one employee of an animal rescue facility was pinged for nearly $1 million. Her account shows a negative $999,193.75.
A quick update on what happened:
MyPayrollHR basically manages payroll for many different organizations as a 3rd party.
Normally, the payroll funds are given by the small businesses to MyPayrollHR, who then send the money to a 3rd company called Cachet which manages the direct deposit of the funds into the employees bank accounts.
One day Cachet deposited the money into the employees account, then found out that the bank account that MyPayrollHR was supposed to deposit the money into was empty.
So the Cachet tried to reverse the payments. But they made an error on their application to have the funds reversed, so they had to submit a second form.
Some local banks processed the first form as well as the second form, causing the funds to be double withdrawn. Some banks just went crazy and processed multiple reversals.
Cachet then had a change of heart and decided to cancel the reversals. This threw things further out of whack.
So at present, Cachet is out 26 million in payroll payments. Plus they found that the account that MyPayrollHR was supposed to be depositing tax withholdings into was also empty, so there’s a further 9 million missing from there. And some banks went haywire with processing multiple reversals and cancellation of reversals and their computer systems went nuts.
So long story short, someone at MyParollHR embezzled $26 million in payroll funds, plus another $9 million from their income tax fund. Cachet is left holding the bag and the multiple deposits, reversals, and cancellations caused local banks computerized systems to fail. Also, bank computer systems are antiquated and easily befuddled.
Or it may not have been embezzlement. MyPayrollHR may have been hacked and the money taken that way. But the fact that they denied anything was wrong until the last minute and their website is still accepting new accounts even though the company has supposedly been shuttered leads me to believe that embezzlement is more likely.