When a Cryptocurrency Scam Becomes a Bank Recovery Claim

Our client lost almost £500,000 to a sophisticated cryptocurrency investment scam, involving more than 200 payments over a period of 16 months. What followed was a complex recovery process, requiring us to reconstruct events that had taken place more than five years earlier and then examine whether the bank had taken sufficient steps to prevent the losses occurring.

Despite the obstacles we faced, we ultimately succeeded in securing a substantial recovery for our client, with the Financial Ombudsman Service issuing a binding decision requiring our client’s bank to pay £360,186, including interest.

Read the full story below, and the Financial Ombudsman Service decision here: Financial Ombudsman Service decision

We are pleased to have secured a significant outcome for our client following a binding decision by the Financial Ombudsman Service (FOS), requiring his former bank to pay £360,186.00 (including interest)

Our client was the victim of a sophisticated cryptocurrency investment scam. Over a 16-month period, he made more than 200 payments from his bank account, ultimately losing almost £500,000.

When the matter first came to KMT Law, it was not an obvious or straightforward recovery claim. The scam had taken place more than five years earlier and there was a significant amount of information to reconstruct, creating uncertainty about the prospects of success. However, Senior Partner Marc Traube assessed the commerciality of the matter and, notwithstanding the risks, considered that with the right approach there was an opportunity to build a strong case.

A team effort

Senior Partners Marc Traube and David Ward oversaw the matter, with responsibility for the day-to-day running of the case given to Nadine Matyas. This was Nadine’s first case to manage from beginning to end, acting as the central point of contact for the client, the bank and the Ombudsman, and preparing and coordinating the submissions throughout.

We reconstructed the chronology and examined our client's bank statements, cryptocurrency transactions and communications with the scammers. We considered what the bank knew, when it knew it, and what it should reasonably have done to identify and intervene in relation to the activity taking place on the account.

The real challenge was reconstructing events that had happened more than five years earlier. Our client's recollection of a complicated and difficult period understandably had to be pieced together carefully.

Our case focused on the contrast between our client’s previous banking activity and the bank’s response to the subsequent pattern of transactions.

There were 203 payments over the course of the scam. The pattern, frequency and amounts were materially different from our client’s previous banking activity.

One issue that particularly concerned us was that the bank ultimately closed his account because of suspicious activity. We therefore asked a straightforward question: If the activity was sufficiently concerning to result in the account being closed, why was there no effective intervention much earlier, when the losses were occurring?

We challenged the bank to explain what due diligence and intervention had taken place during the period in which the losses were occurring. The bank ultimately denied liability, and we therefore escalated the matter to the Financial Ombudsman Service (FOS).

The FOS investigator found, among other things, that the bank had a duty to exercise reasonable skill and care and to recognise vulnerable consumers who may be particularly susceptible to scams. The investigator concluded that, based on the information available to the bank, it should have identified that our client was most likely the victim of a cryptocurrency investment scam and explained the features of such scams and how they operate. The investigator concluded that had the bank intervened from the fourth transfer, the scam would likely have been uncovered and the loss prevented.

There was also a finding of contributory responsibility, meaning that our client was held responsible for part of the loss. The investigator therefore required the bank to pay £231,828.86, representing 50% of the outstanding loss from payment four onwards, together with 8% simple interest from the date of each qualifying loss, which represented an additional £128,357.14, totalling £360,186.00.

But that was not the end of the story.

The investigator's decision was not a binding one and would only take effect if both parties accepted it. Our client accepted the decision, however the bank did not. The matter therefore had to be escalated to an Ombudsman.

The Ombudsman subsequently agreed with the investigator's findings and issued a binding decision requiring the bank to pay the compensation.

It was a long process, but ultimately a very significant result for our client.

At KMT Law, we do not over-promise outcomes. No two matters are the same. The law is essential, but so are the particular circumstances of the client, the evidence available, and the risks and obstacles that arise along the way. When we encounter a roadblock or face opposition from the other side, we reassess. We look at the evidence again, consider the options, and adapt our strategy while continuing to move the case forward.

What we can do is listen carefully, understand the individual circumstances and build the strongest case we can. We always remain persistent and consistent on our client’s behalf, not just when the process becomes difficult, but especially so. That way we know whatever the outcome we can rest assured that we have explored every possible avenue.

Often, after a very long journey, that persistence pays off.

And one of the best parts of the job is being able to make the call to a client and tell him that something he had given up hope of ever recovering is finally coming back to him.

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