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The FBI and the New York State Department of Labor confirmed this week they are investigating allegations that a widely-used payroll company diverted nearly $35 million in employee pay to its own bank account before abruptly closing up shop, leaving more than 250,000 employees across the country without paychecks.

According to authorities, MyPayrollHR, based in Clifton Park, N.Y., shut down last week after direct-deposit company Cachet Financial Services accused it of moving $26 million from small-business employee paychecks to one of its own bank accounts.

In some cases that meant small business employees did not receive their regular direct deposit paychecks at the end of August. To make matters worse, many of those same employees found their accounts had been dinged twice, leaving their bank accounts in the red.

The second withdrawal was due to a technical glitch that has since been corrected, Cachet’s general counsel Wendy Slavkin told NBC News. Slavkin added that MyPayrollHR still hadn’t made the original payments and that’s when the company called in the feds.

In a cryptic message last week, MyPayrollHR told its 4,000 clients that “we are no longer able to process any further payroll transactions.”

The now-defunct New York operation also allegedly stiffed National Payment Corporation, a Florida-based firm that handles $9 million in tax withholdings for MyPayrollHR clients.

“NatPay was provided information that MyPayrollHR and Cloud Payroll may have been the victims of fraud committed by their holding company ValueWise, whose CEO and owner is Michael Mann,” NatPay told KrebsOnSecurity. “NatPay immediately put in place steps to manage the orderly process of recovering funds (and) has more than sufficient insurance to cover actions of attempted or real fraud.”

In Tennessee, the paycheck debacle has left Tanya Willis’ animal shelter at a standstill, CBS News reported.

“It hurts,” Willis said. “This isn’t something that we were prepared for.”


She said she’s been trying to contact MyPayrollHR but that “all of their phone lines were down and all of their social media accounts were wiped off.”

The FBI’s Albany office tweeted Wednesday that it is “seeking information from business owners who may have suffered financial loss due to the alleged activity of MyPayrollHR and its affiliates.”

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