Not upheld: scam / investment fraud - failure to prevent payments complaint against J.P. Morgan Europe Limited trading as Chase

Decision detail

Summary

Mr S complained that Chase refused to reimburse him for losses from a 'pump and dump' investment scam. Mr S had made several payments to a share dealing platform believing he was making a legitimate investment, but the shares lost most of their value when the scam was exposed one day after his final payment. Chase had intervened twice during the transaction process and Mr S had reassured advisors he had control of the account and was buying legitimate NASDAQ-listed shares. The ombudsman found that while Chase should monitor for fraud, the circumstances did not clearly indicate fraud at the time, the payments were to a legitimate platform under Mr S's control (not a third party), and the scam had not yet been exposed when Chase intervened. Accordingly, the complaint was not upheld and no reimbursement was ordered.

The Ombudsman's reasoning

The ombudsman found that although Chase should have monitored for fraud risks and intervened on suspicious transactions, the circumstances here did not clearly indicate fraud. Chase did intervene twice and Mr S provided reassuring explanations that he had control of the account, was buying legitimate NASDAQ-listed shares, and had not been compromised. The scam was not exposed until after the final payment, so earlier questioning would not have revealed it. The payments went to a legitimate platform under Mr S's control, not to a third party, which is atypical of investment scams. While some hallmarks of investment scams were present (messaging service communication), these alone are insufficient to require prevention. Mr S authorized the payments himself, and under PSR 2017 he bears initial liability. The ombudsman was not persuaded that further intervention would have prevented Mr S from proceeding given his strong belief in the investment.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website