Consumer contacts us to complain after a cryptocurrency investment scam

Fraud and scams

Marta invested into a cryptocurrency trading account, but when she tried to withdraw the money she had invested she was told she needed to pay extra fees. Marta became suspicious and worried she'd been the victim of a scam, so reported the matter to her bank.

What happened

Marta was browsing the internet and came across an advert which suggested that two well-known celebrities had made huge profits investing in cryptocurrency. The advert took her through to a website, which asked for contact details if you were interested in receiving more information. Marta added her details and soon afterwards she received a call back.

The caller claimed they could help her make money by investing in cryptocurrency. They would act as her ‘account manager’ and would help her to place ‘trades’ through an account on their trading platform – which they would open for her.

In order to invest, Marta was told that she first needed to open an account with a crypto-exchange – a website offering the ability to turn her pounds sterling into cryptocurrency.

Marta wasn’t sure about how to do this – so her account manager, as part of the ‘service’ he would provide, suggested she download some software which would allow him to guide her through the setting up process on her computer. Marta did not consider herself technologically minded, so was relieved to get this help as she was worried it might be complicated to set up by herself.

Marta transferred £1,000 to her account at the crypto exchange, purchased some Bitcoin and then sent it on to what she believed was her trading account with the caller’s trading platform. She could see the value of her investment by logging into the trading platform.

Initially she appeared to be doing very well, her investment increased in value and she was persuaded to invest more – in the end Marta was making payments in excess of several thousand pounds at a time.

When Marta asked to withdraw her investment, the account manager said she’d need to pay substantial fees to do this. This made Marta suspicious and she contacted the bank to report she’d been the victim of a scam.

Unfortunately it transpired that the ‘trading platform’ Marta thought had been showing her how well her investment has been doing was an illusion created by the fraudster and merely part of the scam.

Marta’s bank argued that she hadn’t suffered a financial loss by making payments to her own cryptocurrency account. It argued that she should instead pursue the matter with the crypto exchange.

What we said

The CRM Code did not cover this type of transaction, because the payments Marta made from her bank account were sent to an account held in her own name with the crypto exchange. However, outside of the CRM Code, banks have other fraud prevention obligations – including to look out for unusual transactions.

We thought the spending on Marta’s account was very unusual for her and – after the first few payments – the pattern of transfers from her account should have caused the bank some concern meaning that it ought to have intervened. We thought that if the bank had asked Marta about the transactions she would have told it what she was doing. Even though the payments went to an crypto account in her own name, we felt that the bank was sufficiently aware of the common features of this kind of scam and should have warned about the risk of being scammed and the need for her to make further enquires at this point.

As Marta’s circumstances had many of the hallmarks of a cryptocurrency scam and taking into account what we learnt about Marta through the course of the complaint, we thought a conversation would have made a difference and would, more likely than not, have prevented further loss.

In deciding fair compensation, we also considered if would be fair for Marta to bear any additional responsibility for what happened. However, as we thought the trading platform and correspondence with the fraudsters was very convincing, we decided against that on the facts of this case. So we asked the bank to refund all the transactions which took place after the point we thought it should have intervened.

Some ways to help protect yourself against cryptocurrency scams

  • Cryptocurrency is unregulated and its value can change dramatically. So, even when purchased legitimately, it’s a very high risk investment.
  • Be wary of adverts online and on social media promising high returns on investments in cryptocurrency. Adverts may feature fake celebrity endorsements which can appear very realistic.
  • If you invest in a firm which isn’t authorised by the FCA, you risk losing your money, without any protection.
  • Fraudsters claim to be able to help you make speculative bets on the value of cryptocurrency. They may manipulate the results of those trades to make them appear unsuccessful or simply stop communicating once you ask to withdraw your money.
  • Trading of this kind is, even when legitimate, very complex and very high risk. If you don’t understand how it works, then its best to avoid it.
  • NEVER allow someone to take control of your computer, especially when you’re viewing your bank accounts
  • Fraudsters will claim that banks don’t like cryptocurrency because it’s a competitor or because they don’t understand it. Don’t listen. They don’t want you to tell the bank what you’re doing because it’s a scam.