Consumer complains about bank’s response following a social media investment scam

Fraud and scams

Miguel made payments to an online foreign currency trader, but became suspicious when the trader claimed they couldn’t release his winnings unless he paid various fees. Worried he’d been the victim of a scam, Miguel reported the matter to his bank. Unhappy with how the bank responded, he contacted us.

What happened

Miguel was looking for a way to supplement his part-time income while he was studying. He’d frequently seen people on social media claiming that significant amounts of money could be made trading foreign currencies, often known as ‘forex trading’. He contacted someone through a friend of a friend who’d advertised such a service.

It was explained to Miguel that he wouldn’t need to do any trading himself – he’d just need to make payments to the ‘trader’, who’d then return a larger amount within a few days. It was claimed that for an investment of just £300, he’d receive £3,000 two days later.

Miguel was a little wary and asked for some evidence that the trader would do what he claimed. The trader sent some screenshots, apparently showing successful trades and messages from previous happy customers. They also provided the name of a company which they claimed to work for. Miguel looked up the company and could see that it existed.

After Miguel made the initial payment, the trader claimed they couldn’t release his winnings unless he paid various fees and taxes. Miguel made further payments totalling £700, but when the trader kept asking for more money, he became suspicious and reported the matter to his bank.

His bank said that the returns he was promised were unrealistic and Miguel had made no real attempts to establish the identity of the person he paid. So, it declined his claim under the CRM Code.

What we said

In this case, we agreed that the returns Miguel was offered were implausibly high. Though we accepted that Miguel had taken some steps to verify the identity of the trader, we noted, according to company records, the name of the trader didn’t match anyone associated with the company he claimed to work for and neither did the company appear to be engaged in trading activity. So, we weren’t sure why Miguel found this to be persuasive.

We were also of the view that Miguel ought to have been even more concerned when he was asked to pay fees which hadn’t been mentioned previously. Overall, whilst sympathetic to his predicament, we didn’t think Miguel had a reasonable basis for believing the recipient of his funds was legitimate. We also didn’t think, considering Miguel’s previous account activity, the payments would have stood out as being remarkable. So, the bank hadn’t made a mistake in allowing them to leave his account and we didn’t ask it to refund any of the payments.

Some ways to help protect yourself against social media investment scams

  • If you invest in a firm which isn’t authorised by the FCA, you risk losing money, without any of the usual protection.
  • Adverts on social media that appear to offer spectacular returns on investments are almost certainly scams. If it sounds too good to be true, it probably is.
  • NEVER pay fees, taxes or other charges in order to receive money out of an investment. A reputable business would deduct charges from money owed to you, not ask you to pay upfront. If you pay, it’s likely the fraudster will keep on asking for money.
  • As the cost of living rises, a scheme that promises high returns or that says you’ll “get rich quick” might seem tempting. Scammers prey on this. So if you’re looking to invest, seek impartial advice or guidance instead. MoneyHelper has information on investing and about how to find a financial adviser.