The sudden closure of a payroll company has caused about $26 million worth of paychecks to vanish from the personal bank accounts of thousands of workers across the country.

The FBI is now investigating after MyPayrollHR, a payroll service provider based in Clifton Park, New York, shut down without warning last week.

The abrupt closure came soon after workers started reporting that their recent paychecks had been withdrawn from their accounts after they had already been paid.

Some workers had their original paycheck amount deducted up to three times, leaving them with negative bank account balances at the beginning of the month after rent payments had already been made.

They are now being hit with various account fees due to their negative balances.

It is not clear where the deducted money has gone. It also isn't clear exactly how many workers have had money withdrawn from their accounts.

The total amount of paychecks deducted is believed to be $26 million but the total losses, including taxes, is estimated to be roughly $35 million.

MyPayrollHR is refusing to comment on the scandal that is believed to have affected about 4,000 companies across the country.

The sudden closure of New York-based payroll company MyPayrollHR has caused about $35 million worth of paychecks to vanish from the personal bank accounts of thousands of workers across the country

The FBI is now investigating after MyPayrollHR, a payroll service provider based in Clifton Park, New York, (pictured) shut down without warning last week

HOW DID THE PAYROLL SCANDAL OCCUR? How payroll normally works: Various companies enlisted MyPayrollHR to process their payroll and pay their employees. MyPayrollHR used an automated clearing house to withdraw a sum from an employer's account. That sum was placed into a holding account and then distributed by the clearing house into an employee's personal bank account. If a mistake was made, the amount could be withdrawn from the employee's account. What happened with MyPayrollHR that saw employees' paychecks withdrawn? MyPayrollHR instructed its clearing house, California-based Cachet Financial Services, to withdraw $26 million from employers. It was supposed to then be put into the holding account. However, Cachet claims MyPayrollHR somehow manipulated the account numbers so the money was put into an account controlled by MyPayrollHR instead of the Cachet-controlled holding account. When Cachet tried to access the MyPayrollHR accounts they came back frozen. By this stage, Cachet had already distributed the paychecks to employees. Cachet immediately reversed the payments when it realized it was out of pocket $26 million. Some employee's account were hit with double the withdrawals because their banks didn't question or reject the reversal. What happens now? Cachet said it eventually sent out an alert to banks telling them to reject all reversals. Employees can contact their banks to have their paychecks deposited back into their accounts. Financial tech company DailyPay has since set up a relief fund for those employees who are being hit with additional fees due to their negative bank balances. Cachet is working with the FBI to recuperate its $26 million from MyPayrollHR. Advertisement

A Facebook support group for those who have been affected is growing by the day as many workers say they have been left unable to pay their bills or feed their families.

The FBI confirmed on Wednesday it was investigating and said it was seeking information from business owners who may have suffered a financial loss due to MyPayrollHR's activity.

New York Governor Andrew Cuomo also vowed to take action, saying: 'The company's reckless actions have left employees across the state with negative bank accounts. They deserve answers.'

It is common for companies to use third-party payroll processors to pay their workers.

How it is supposed to work is MyPayrollHR enlists the services of an automated clearing house - in this case it is California-based Cachet Financial Services - to withdraw a sum from an employer's account.

That sum is placed into a holding account and is then distributed by the clearing house into an employee's personal bank account.

If a mistake is made, the amount can be withdrawn from the employee's account.

The situation involving MyPayrollHR is believed to have started last month when the payroll company instructed Cachet Financial Services to withdraw about $26 million from employers.

It was supposed to then be put into the holding account.

Cachet's general counsel, Wendy Slavkin, told TechTarget that it didn't happen because MyPayrollHR had somehow manipulated the account numbers.

The clearing house claims it is a victim of fraud in the MyPayrollHR scandal.

'MyPayrollHR manipulated the account numbers in that electronic file so that the money was taken out of the employer's account and put into an account controlled by MyPayrollHR, not a Cachet settlement account, as it should've been,' Slavkin said.

When Cachet automatically tried to access the MyPayrollHR accounts it came back as frozen. But the money had already been taken out of Cachet's holding account and distributed to the employees as their paychecks.

'Now all of a sudden Cachet is out $26 million because it's effectively made the payroll for all these companies,' Slavkin said.

Cachet, due to its standard protocol, said they immediately started withdrawing the amounts already distributed to employees to claim back their money.

The FBI confirmed on Wednesday it was investigating and said it was seeking information from business owners who may have suffered a financial loss due to MyPayrollHR's activity

Some employee's accounts were hit with double the withdrawals because their banks didn't reject the reversal.

Cachet eventually sent out an alert telling banks to reject all reversals so employees could still be paid.

The company, which has been working with MyPayrollHR for roughly 12 years, said it has since spoken to the FBI.

'The employees will have their pay back, but in a sense, they've been paid by Cachet and not their employer,' Slavkin said.

'We just have to see how this plays out and how effective the FBI can be in helping us recoup our money.'

Cachet said it is currently out of pocket $26 million but the loss could be up to $35 million due to unpaid tax by MyPayrollHR. Following an internal review, Cachet said they were confident it was an isolated event caused by the single payroll provider.

Many employees are still working with their banks to have their account balances restored and retrieve their money.

Due to the mishap, companies were left scrambling to write new checks or deposit money into their employee's accounts without the assistance of a third-party payroll provider.

Employees at an animal rescue charity in Nashville, Tennessee had $1 million removed from their personal and business accounts as a result of the MyPayrollHR scandal.

Agape Animal Rescue said payroll deposits were made in employees' bank accounts in early September, but on September 5 they woke up to find money had been withdrawn.

One employee reported seeing a negative bank balance of $999,000.

A GoFundMe page has since been set up to help the animal adoption charity which has had to reduce the amount of dogs they take in while they address the financial situation.

Brooke Taney of Albany, New York was one of thousands of employees who had funds withdrawn from her bank account because of the MyPayrollHR debacle

Employees at animal rescue charity have more than $1 million taken from accounts Employees at a Tennessee animal rescue charity had more than $1 million withdrawn from their personal and business accounts in the MyPayrollHR saga that has left workers across the country struggling to pay their bills. Agape Animal Rescue, which is run out of Nashville, said paychecks were deposited into their employees' bank accounts at the beginning of the month but the money was withdrawn just days later. The non-profit organization immediately contacted their payroll provider MyPayrollHR to address the issue and were initially told it was just a glitch. One employee's bank account showed a negative balance of $999,000 Soon after, Agape received a message from MyPayrollHR saying it was closing down due to 'unforeseen circumstances'. The payroll service made no mention of the lost money and, to make matters worse, more money kept being withdrawn from the employees' bank accounts. Agape's executive director Tanya Willis told WKRN they are now down about $10,000 in cash and fear their taxes have not been paid. Most of the Agape employees had their accounts go into negative overdrafts when their paychecks were withdrawn. One employee's bank account showed a negative balance of $999,000. A GoFundMe page has since been set up to help the animal adoption charity who have had to reduce the amount of dogs they take in while they address the financial situation. Advertisement

One victim, Cathy Robinson LeCroy of North Carolina, told DailyMail.com: 'I was affected. I worked for a home health agency. On August 30th, I received my payroll check. On September 5th they withdrew it under the name cachetBanq [sic]. The following day, again, a reversal. Now under the name of our company.

'I have been super stressed out, maximizing my credit cards to live off of. My Bank SunTrust was able to stop one reversal. However the other is still pending. I have been taking time off my new job. As banks aren't open after 5. I have lost time, money, gas. And mentally drained. Trying to resolve this.

'My old company offered me a loan, if I signed a waiver saying they weren't responsible for the issues. I declined the loan. Will it ever end?'

Brooke Taney, who works at B-rads Bistro in Albany, New York, said she was among those who had their paychecks withdrawn multiple times.

'I tapped out my entire savings account to pay my rent for this month,' she told WRGB.

She said she was checking her bank account regularly to see if her money had been returned when she spotted that the sum had been deducted a second time.

'This is our money and I shouldn't have to fight to get back money that I worked for.'

Another business that was affected was Liken Home Care in Forest Hills, Pennsylvannia.

About 130 employees had their paychecks withdrawn.

'I checked my bank account and the money was gone. They took it back,' Cindy Foreback told WTAE.

'A lot of these people live paycheck to paycheck, and they didn't have the money in their accounts to cover the reversal, so they've been getting hit with fees left and right.

'People can't pay their rent. They can't buy food for their kids.'

Financial tech company DailyPay has since set up a relief fund for those employees who are being hit with additional fees due to their negative bank balances.

They are are committing $25,000 to pay for overdraft and/or late fees for those affected employees.

Any employee that has incurred a late fee or non-sufficient-funds fee as a result of their pay not being deposited into their bank accounts will be reimbursed up to $100 per employee.

'For employees and even for employers, payroll can seem to be a straight-forward process. But it's a multi-layered process with room for error and even fraud,' said Melanie O'Malley of O'Malleys Oven, which is a former MyPayrollHR client.

'We are extremely grateful for DailyPay and their eagerness to help. Businesses like this, and the employers who stretched themselves thin to make employees whole, remind us that integrity is still a virtue.'

Any employee affected by the shutdown of MyPayrollHR is encouraged to email paythepeople@dailypay.com to find out how to securely apply for the relief fund.