I deposited a check/money order into my individual consumer account, but the bank later told me it was fraudulent. I had already used some of the funds, and now my account is overdrawn. The bank says that I am liable for the entire amount. Is this true?
Depending on the circumstances and your state's laws, you may be held responsible for the entire amount of the fraudulent check that you cash at the bank or deposit into your account. If your bank credited your account, it can later reverse the funds if the check is found to be fraudulent.
This could be a check overpayment/money order scam. It's an example of why you should never accept a check from someone you don't know.
As the payee, it's up to you to pursue the maker of the check. If you think you have been targeted by a scam, you should file a complaint with the Federal Trade Commission (FTC) or by calling 1-877-382-4357.