Halifax agree to compensate cryptocurrency fraud victim

The gentleman had seen an online advert in March 2021 and completed an enquiry form. A representative who called himself Lucas Hoffman, and claimed to be from a company called WiseCoin, then telephoned and convinced the gentleman to set up an online cryptocurrency trading account. He was also persuaded to set up a money transfer account so that he could easily transfer money from Halifax and withdraw money back again.

In total, the gentleman transferred £52,000 and gave Mr Hoffman access to the accounts to trade in cryptocurrency investments on his behalf.

When the value of his cryptocurrency investment showed as £119,000, the gentleman asked for it to be sold and his money withdrawn. At that point, Mr Hoffman said a colleague would need to arrange this, but nothing happened. The concerned gentleman contacted his bank, which told him that he had been scammed.

We recently blogged about this type of scam – often initiated through an online advert which collects personal data. The scammer gains the victim’s confidence, and then uses manipulative techniques and deception to persuade the victim to send sums of money on a regular basis, from their bank account. They may also refund a small amount as a good will gesture, to reassure the investor further and adding credibility to the scam.

Because the payments are authorised by the bank account holder themselves, they may feel foolish and embarrassed at what they have done. They may also think that nothing can be done to reclaim the money. However, banks have a duty to apply due diligence to their customers’ accounts and have the power to stop or delay any transactions which raise ‘red flags’, such as unusual or new recipients, large or regular transfers, or where vulnerable customers are involved such as the elderly or financially naïve such as young adults.

The gentleman banked with Lloyds-owned Halifax. Lloyds reopened the investigation and considered whether or not the gentleman might be entitled to a refund under the Contingent Reimbursement Model Code, a voluntary code introduced by the Government in 2019 to help reimburse APP fraud victims.

Lloyds discovered that the gentleman had opened a genuine money transfer account with a company called Wise, which sounds like WiseCoin, but is a completely different company. Over the next year, several large sums were transferred into the Wise account, then quickly moved elsewhere. The bank did block one transaction, after which the gentleman transferred money directly into what turned out to be the scammers’ accounts, rather than his own.

Lloyds Banking claimed the Contingent Reimbursement Model Code only covered the money that had been transferred into the scammer’s accounts, not the gentleman’s own money transfer account. Around 50% of his money has now been refunded.

Wise was asked to investigate also but found no trace of the gentleman’s money. They claimed that they could not have stopped the scam, as he had given the scammers remote access to his computer, which is against their terms and conditions.

Sarah Spruce, Head of Professional Negligence, commented:

“Anyone who thinks they have been scammed should contact their bank and the police straight away. There may be a criminal investigation which, if successful, can lead to a compensation order from the court. But if the fraudster is overseas or has no assets, you may not be able to get the compensation you are owed.

We help clients with complaints against banks that have not done enough to protect them. It is concerning that elderly victims and the vulnerable are increasingly falling victim to such elaborate online scams. As these victims are often too embarrassed or ashamed to say anything, many cases worryingly go unreported.”