Oak Bluffs lost $332,000 in cyber scam

New details have emerged about the August cyber scam that hit Oak Bluffs, including that the town was scammed out of $332,000. The funding was originally intended to go to an affordable housing project before funds appeared to have been intercepted by a scammer during the payment. 

The town is working to recoup the funding with the help of the FBI and with an Oak Bluffs’ insurance provider, which town officials say have not been very helpful.

In the meantime, the Oak Bluffs select board is putting a request to voters to use $332,000 from the town’s general stabilization fund to cover the stolen grant money at a special town meeting planned for Oct. 29.

Oak Bluffs Police and the FBI have been investigating the cyber scam since mid August.

According to the executive summary from the draft warrant, the original $332,000 was meant to go toward designing an enhanced denitrification wastewater system for the Southern Tier (Takenash Knoll) housing project, which is being developed by Island Housing Trust and Affirmative Investments. The developers had applied for and received the grant in 2021 with Oak Bluffs as the municipal host for the reimbursable grant. 

The town received the grant reimbursement from the state, but when the payment to the developers was going out, the Affirmative Investment representative’s account was “intercepted, and fraudulent emails were substituted,” the town warrant article reads. 

Also, “additional cross checks regarding the confirmation of the banking data were inadvertently omitted,” which ultimately resulted in the theft of the first payment to the developers. 

Affirmative Investments is a Boston-based finance and development firm that has worked with Island Housing Trust on housing projects before, including Meshacket Commons in Edgartown. 

“Upon discovery of the issue, the Town did perform a full IT review to determine if any Town systems were compromised, which did not appear to be the case and reported the fraud to the OBPD and FBI,” the draft warrant article executive summary reads. “Temporary measures were immediately put in place to prevent issues moving forward with permanent written amendments to policies and internal controls being developed for implementation along with other actions in consideration.” 

During a Tuesday select board meeting, Oak Bluffs town administrator Deborah Potter said she has been working with the town’s insurers to try to rectify the “fraud issue.” Potter said the state recommended taking money from the town’s stabilization fund to cover the lost funding, which would require a two-thirds majority vote at town meeting. “This would give us the ability to fill the gap now while we’re working on the recovery and the other segments with the FBI and the insurance company,” Potter said. 

She also said there were possible legal ramifications if they didn’t solve the issue soon. 

“The inherent risk is that if we don’t make good on the monies that we received from the state from a grant to the entity to which the grant was supposed to go, I think it puts us in a precarious position because it makes it look like we won’t fulfill our obligations as the grant awardee,” Potter said.

The town is working to get a partial refund through the FBI and working out another portion with the town’s insurance companies, who have not been very cooperative “in any way, shape, or form,” Potter said. 

Board member Dion Alley said he supported the measure if it was the most expeditious way to resolve the matter. “We need to get the funds to the appropriate parties because they’ve been disadvantaged as well, even though it sort of came from them,” Dion Alley said.