Cloud-based payroll company MyPayrollHR, based in upstate New York, has vanished with nearly $35 million in payroll funds from its customer firms, leaving thousands of employees not only stiffed for their pay but also for additional funds that also disappeared from their accounts—including money that wasn't even in their accounts in the first place.

Angry and overdrawn employees who had been receiving direct deposits from the firm, a subsidiary of ValueWise Corp. as well as their employers, were left in the lurch after apparent malfeasance by the payroll company's CEO Michael T. Mann. KrebsOnSecurity reports that not only did payroll funds disappear, but also money that belonged to some of the employees affected.

CBS News reports that one employee at an animal shelter rescue—which had to shut down until the money is recovered—actually lost way more than she had. According to Tanya Willis, who runs the shelter, one employee's account—which had less than $1,000 in it—was overdrawn to the tune of nearly a million dollars. She told CBS, "She had less than a thousand dollars in that account so we want to know how is that even possible?"

Cachet Financial Services handled the process for MyPayrollHR, and KrebsOnSecurity says that for more than 12 years the latter would submit a file to the former to tell it "which employee accounts at which banks should be credited and by how much."

But the instructions file on September 4 was different, and instructed Cachet to send all clients' payroll funds instead to an account at Pioneer Savings Bank that was operated and controlled by MyPayrollHR. That amounted to approximately $26 million, but it didn't end there. Even though MyPayrollHR's account was subsequently frozen, the payroll file instructed clients' financial institutions to go ahead and withdraw the money from Cachet's holding account, despite the fact that there had been no deposit.

And finally, an incorrectly formatted reversal request from Cachet, followed by a corrected one, resulted in a number of financial institutions processing both reversal requests.

Mann has not returned phone calls from customers seeking redress, and MyPayrollHR has notified customers that it was going out of business and they needed to find other means of payroll distribution. Both the FBI and federal prosecutors in New York are investigating, and the report adds that Cachet isn't the only company left holding the bag for the initial $26 million deposit.

National Payment Corporation (NatPay), a Florida-based firm that handles tax withholdings for MyPayrollHR clients, is also on the hook for more than $9 million after payment files were processed despite the bank accounts of MyPayrollHR and an affiliated company being frozen. MyPayrollHR's website is now offline and Mann has still not been heard from.

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Payroll company vanishes with $35 million, stiffing employees

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