* Step 1: Transfer funds from each Employer's account to Cachet's holding account
* Step 2: Transfer funds from Cachet's holding account to each Employee account
Both of these steps are handled with an 'instructions file'.
The crime (or horrible mistake that really looks like a crime):
Step 1's file was changed so that the funds went to an account at Pioneer Savings Bank (controlled by MyPayrollHR)
Step 2's file was sent as it normally would be.
Mistake 1: The file for Step 2 was processed, and funds from Cachet's holding account were transferred to employees, despite funds from Employers not coming in.
Apparently Cachet had at least $26M extra in their holding account for this to work.
As a result of this, Cachet tried to reverse these transactions, since basically they hadn't actually been paid.
Mistake 2: The reversal file was improperly formatted. NACHA rules say these files should be ignored or rejected, but..
Mistake 3: Some financial institutions processed the improperly formatted file anyway.
To fix Mistake 2, Cachet submitted a new reversal file, which was then also processed by the companies.
It sounds like this "reversal file" was actually just a transfer in the other direction (as opposed to "undo transaction ID 937641745"), so of course it would make sense that it was processed.
As a result, all employees paid via MyPayrollHR were paid, then had that payment removed. Some also had the same payroll amount removed a second time.
One thing I haven't figured out, is apparently the MyPayrollHR account at Pioneer Savings Bank is 'frozen' -- but I can't find any reporting about whether it has $26M in it or not. Meanwhile the CEO has disappeared.. So did he get the money, or just cause a massive life disruption for thousands of people?
There should not be a way for money to leave an account without the account owner's explicit permission.
Given how many people live paycheck to paycheck... It's a pretty big deal.