What are the Legal Aspects of Ransomware?

Who's Getting Hit the Hardest?

In 2024, 59% of surveyed organizations were ransomware victims.

1. Central/Federal Government – 68%

2. Healthcare – 67%

3. Higher Education – 66%

4. Lower Education – 63%

5. IT, Telecoms, and Technology – 55%

6. Retail – 45%

7. State/Local Government – 34%

The report mentions that 11 out of 15 industries had attack rates between 60% and 68%, but it does not provide the full breakdown of the specific industries. 34% of local governments were victims of ransomware in 2024. Local governments, public agencies, and businesses alike are finding themselves on the receiving end of costly ransomware attacks. 

And when we say costly, we mean $2.83 million per attack in 2024, more than double the cost from the previous year. Meanwhile, the price tag for an average data breach has hit $4.88 million, making ransomware not just a cybersecurity issue, but a financial disaster.

But here’s what really stings: according to InfoSecurity Magazine, 18% of ransomware attacks in the U.S. led to lawsuits in 2023. That means even if you push through the attack itself, you might still be staring at legal fees, regulatory penalties, and settlements long after your data is restored.

But you still need your data to run your organization...

We get it. You still have citizens to serve. And after all, 50% of organizations actually pay the ransoms. And the quicker you pay the ransom, the faster you get your data back, right? 

Not necessarily.

Even if you decide to pay the ransom, you may not get your data back, or they may demand more money from you. 27% of organizations that paid the ransom did not get their data back. (Try explaining that to taxpayers...)

And paying ransoms could violate U.S. and international laws! (We'll get to this later.)

What Are the Legal Risks of a Ransomware Attack?

So, what's at stake if your organization gets hit?

• Violation of Data Privacy Laws: A ransomware attack can mean stolen or encrypted data, and that often triggers mandatory breach notifications. Plus, if you fail to notify affected individuals, you could face hefty fines. 

• Lawsuits from Citizens or Third Parties: Stolen personal data? A class-action lawsuit could happen. If your cybersecurity measures are found to be inadequate, the victims (your citizens) can sue for negligence. 

• Regulatory Penalties: The Federal Trade Commission (FTC), Securities and Exchange Commission (SEC), and state attorneys can all come knocking at your door if they determine your organization failed to protect sensitive data. 

• Breach of Contract: If you are contracted with a vendor, partner, or organization that requires certain security measures, failing to meet these standards could mean breach of contract claims. 

• Workforce Fallout: After a ransomware attack, organizations often scramble to cut costs and IT teams are often the first to go. But firing employees after a cyber incident can backfire legally. If the termination is seen as retaliation, or if leadership wrongly blames IT staff, wrongful termination lawsuits could follow. 

In short: There are a lot of legal issues that arise after a ransomware attack.

When Should You Get Legal Counsel?

Right now. Immediately. Ahora! (Sorry, we got carried away...)

But there's no "too soon" when it comes to ransomware prevention! Working with a legal team as a preventative measure can help you prepare for the possibility of being a ransomware victim. 

But you can also seek legal counsel at any point throughout the process:

• Right now, as a preventative measure: This is like studying before a test, you want to know all the information just in case you're a victim. That way, if it does happen, you can face it with confidence. These specialized attorneys will help you prepare documents, communicate effectively with stakeholders, and guide you in best legal practices.

• Before you negotiate with hackers: Paying a ransom might seem like the easy way out, but depending on who's behind the attack, you could be violating U.S. sanction laws or anti-money laundering regulations. So before you pay a dime, you should be talking to a lawyer.

• Before you talk to regulators, the public, or even your own employees: Every statement you make—whether to government agencies, affected individuals, or the media—should be legally sound. Mishandling communications can expose your organization to class-action lawsuits. Discuss communication methods and messages with a legal firm before publishing.

• If layoffs are on the table: If a ransomware attack leads to IT or leadership shake-ups, be prepared for possible wrongful termination claims—especially if former employees argue that they raised security concerns before the attack and were ignored. 

There's another important "when"—when should you report an attack?

• Most state laws require breach notifications within 30 to 45 days.

• Federal regulations may require even faster reporting.

If you fail to report on time, you could face steep regulatory fines from agencies like the FTC, SEC, or state attorneys general.

Worse, if affected individuals aren't notified quickly, lawsuits for negligence, identity theft damages, and breach of contract can pile up fast. In short, waiting to act won't make the problem go away. It'll only make it more expensive. 

Where to Seek Help?

Cyberattacks don't just require an IT fix, they require a legal strategy. So where do you turn to for help?

• Cybersecurity and Privacy Attorneys: Specialized legal counsel can advise you in breach reporting, regulatory compliance, and ransom payment risks.

• Your ERP Vendor: If your financial or operational software was affected, your ERP provider may have legal connections and compliance support or partnerships with cybersecurity experts. 

• Professional Organizations: Groups like the Government Finance Officers Association (GFOA) and the International City/County Management Association (ICMA) provide resources, best practices, and legal guidance for public entities dealing with cyber incidents. 

• Legal Firms Specializing in Government Cybersecurity: Some law firms focus specifically on public sector cyber threats, data privacy laws, and regulatory compliance, making sure you get expert guidance and defense tailored to your legal needs. 

• Your Peers: If another municipality has been through a ransomware attack, learn from their experience! Cities that suffered a cybersecurity attack can offer valuable insights into legal pitfalls and best practices. 

The key takeaway? Don't do it alone. Cybercrime is a minefield, and having the right counsel in place before, after, and during an attack, can mean the difference between a manageable incident and a multi-million dollar disaster. 

Why Should You Care?

We've covered how it can lose you money. But there are other reasons you should care about all this. 

You don't want to lose trust

When public entities suffer a data breach, citizen trust takes a major hit and it's not easily regained. According to a study by BCG, only 2% of companies gained back trust in the quarter after a breach. Other companies surveyed took up to 3 years to regain trust. In local government—where transparency and reliability is a lot—that lost trust can jeopardize funding and public engagement.  Your citizens expect their data to be protected and their tax dollars to be used wisely. If you lose it (or misuse it), you lose their trust.

You don't want to be investigated

A ransomware attack can also trigger federal investigations. Agencies like the FBI and SEC may step in to evaluate how the breach occurred, whether proper security measures were in place, and if negligence played a role. If they determine your cybersecurity protocols are weak (or you mishandled the response), you could be facing regulatory penalties and potential lawsuits. 

You don't want to fund criminals

And let's not forget who's behind the attack. Cybercriminals don't care about your organization. If you're vulnerable, they will exploit you. They sell stolen data on the dark web, use breached infrastructure to launch future attacks, and even manipulate the data for financial fraud.

And every ransom paid fuels the global crime economy—one that grows stronger every time an organization fails to protect itself. 

So it's not just about protecting your data—it's about protecting everyone else, too. Your reputation and the integrity of your entire organization are important, but communities at large are often taking the brunt of attacks. And you should, at minimum, care about them.

How Can You Protect Yourself?

Cyberattacks aren't just a possibility—they're inevitable. A strong ransomware defense isn't just about having a plan in place, it's about making sure that the plan actually works when you need it most. That means using secure cloud storage, proactive cybersecurity measures, and strong legal protections to minimize risks and maximize recovery.

Cloud Storage

When it comes to ransomware recovery, cloud backups are your best defense. Most cloud providers adhere to SOC requirements and other major security standards. This makes sure your data is stored in an environment designed to withstand cyber threats.  On-premises servers are vulnerable to direct attacks. Cloud solutions often offer built-in encryption and multi-factor authentication (MFA) to keep hackers out.

But security is only half the battle. Recovery speed is just as important.

Cloud-based automated backups have an 80% success rate. Why not 100%? Because cloud backups are only as good as the humans, configurations, and testing behind them.

• If a backup process is misconfigured, interrupted, or affected by unnoticed data corruption, the restored files might be incomplete or unusable when you need them most.

• IT teams, even with the best intentions, can accidentally misconfigure backup settings, exclude critical files, or forget to test restoration processes. 

• While rare, outages or downtime at a cloud provider can temporarily impact access to stored data. To mitigate this risk, organizations should consider multiple backup locations or secondary cloud providers to guarantee uninterrupted recovery.

Even in the worst-case scenario, cloud backups ensure you can restore critical files quickly and keep operations running. And because cloud systems log all activity, organizations can easily prove compliance with data security laws, avoiding legal complications after the breach.  

Cybersecurity Measures

While cloud backups provide a safety net, the goal is to stop the ransomware from happening in the first place.

The best way to stop ransomware is through real-time monitoring and proactive security. Cybersecurity services such as the Cybersecurity and Infrastructure Security's (CISA) Cyber Hygiene Services can detect threats before they spread. That way, a single point of entry won't reach the entire organization.

Because the weakest link in cybersecurity is human error. Which is why training staff on best security practices is just as critical as firewalls and encryption. Teaching employees to recognize phishing attempts and suspicious links, and use strong passwords, significantly reduces the likelihood of an attack reaching your systems. 

Legal Protection

Legal preparation is just as important as technical defense. Organizations should work with legal counsel to add protective language to employee and vendor contracts. This gives you some protection from liability. So does developing security and response protocols. If an attack happens, your team needs to know who to contact, how to contain the damage, and what legal obligations must be met.  

A ransomware attack has the potential to be a catastrophe, but not if you prepare ahead of time. Cloud storage provides secure and automated backups to recover quickly. Cybersecurity measures prevent attacks before they happen. Legal protections ensure compliance and reduce liability. You should go 3-for-3.

Wrapping It All Up

Ransomware isn't just a cybersecurity problem, it's a financial, operational, and legal crisis waiting to happen. 

And if you think it can't happen to you, think again. 

By investing in cloud security, compliance measures, and proactive monitoring, you can minimize your legal exposure and recover faster if the worst happens. 

I'm just interested in how it transformed others...