Our client ‘Jack’ was scammed into transferring money to a bogus crypto currency company after seeing an advert online.
In November 2022, Jack was scrolling through Facebook when he stumbled upon an advert for a crypto currency company. It didn’t take him long to be enticed enough into signing up and await a phone call from one of their agents to get set up.
When he received call from the company, Jack explained his financial circumstances and the agent advised him that by investing into their crypto platform he would have the opportunity to turn his fortunes around. As he was speaking to a human over the phone, as opposed to online communication methods, he felt at ease enough to deposit his first £1,000 to the platform.
After depositing the money, Jack’s bank contacted him, warning him against making any further payments to this company – this set off alarm bells and made him panic, thinking he had been scammed. However, the agent from the crypto company called him back and reassured him, convincing him that the bank didn’t want him to earn lots of money as it would mean they would have to pay him more interest.
Despite believing what the agent was telling him, Jack still had reservations and ceased any further communication with the company. However, they bombarded him with phone calls and messages to try to persuade him into transferring more money. In April 2023, Jack received a message saying that the company will stop communicating with him, but the following June, he received a phone call from another agent based in Switzerland who advised him that interest rates were about to rise and, if he started reinvesting now, he would make more money than what initially forecast for him.
At this point, the scammers realised that Jack was not entirely tech-savvy and even coerced him into purchasing equipment for his laptop using money he had already invested. Though this was done under the guise of them helping him, they were merely tricking him into trusting them.
Jack was once again manipulated into believing the scammers’ lies and ended up transferring £10,000 from an account at a different bank than the one that originally warned him. He received another call from the Swiss agent, who told him that his investment was now worth £17,000 – they further advised him to transfer another £40,000 if he wanted to see that money turned into £100,000.
Jack took out two loans worth £40,000 so that he could invest it into cryptocurrency, but shortly after he got cold feet again and cancelled his loan applications. When he informed the agent what he had done, they told him that they were not happy, and he would have to pay a £7,000 fine. Jack asked if it could be deducted from his investment return and the original £10,000 be transferred back to him. Though the agent disagreed at first, they reached compromise whereby Jack would pay half of the fine and he would receive his invested money back.
Soon after, Jack was told that he would have to pay them a further £1,500 to cover the gas charges to release his remaining funds. He did what was asked, but he never received the original money he invested.
After realising he had been scammed, Jack contacted the police but there was nothing that could be done.
Unsure of what to do, Jack contacted Barings Law for help on retrieving the money he had been scammed out of. Our Bank Fraud team conducted a thorough investigation and noticed that Jack’s new bank had not warned him about transferring large amounts of money to the crypto scammers.
As a result, we issued them with a letter of claim detailing how all of the transactions he made bore the hallmarks of a scam due to their unusual nature which were not aligned with his usual spending habits and were all authorised within a short period of time. We alleged that they were responsible for Jack’s financial losses as they failed to exercise reasonable skill and care, as expected of a regulated bank. Had adequate checks been made and due diligence taken place, they would have had reasonable grounds to intervene.
However, due to their lack of intervention and fraudulent detention/prevention measures, it was considered that the transactions were authorised with ‘shut eyes’ to the obvious fact that the transactions were out of the ordinary and unusually high.
We argued that the bank had breached Conduct of Business Sourcebook (COBS) rules under the following principles:
- Principle 2 – ‘A firm must conduct its business with due skill, care and diligence’.
- Principle 6 – ‘A firm must pay due regard to the interests of its customers and treat them fairly’.
As a result of the bank’s breach of duty, Jack sustained a substantial financial loss in the sum of £14,000 plus interest.
Jack’s bank responded stating they would not be upholding the complaint and claimed that the correct procedures were followed on their end. This resulted in our team taking the complaint to the Financial Ombudsman Service (FOS).
The FOS reviewed all evidence submitted by both parties and concluded that the bank should refund 50% of Jack’s losses and apply simple interest of 8% from the date of the transactions until settlement.
The FOS investigator said “The bank should have recognised that Jack could be at heightened risk of financial harm from fraud when they made the first payment. Had the bank intervened, I believe the scam would have been prevented”.
As a result, Jack was awarded £5,090.09 in compensation. His settlement illustrates that banks have a duty of care to prevent their customers from falling victim to fraud – and as online fraud continues to rise, they need to ensure their fraud prevention measures are held to a high standard.
*Amount awarded is before legal fees and disbursements.