Upheld: scam reimbursement under CRM Code; authorised push payment (APP) scam complaint against Metro Bank PLC

Decision detail

Summary

Mr S invested £188,000 in company G, which was presented as a building company with a hotel chain contract, expecting to receive interest returns. After receiving initial returns, G went into administration and Mr S claimed fraud with Metro Bank PLC, which declined reimbursement. The ombudsman found that G operated a scam by raising £25.3 million from investors while only having £4.4 million in genuine contract work, using the majority of funds for personal expenses, sponsorship, and unrelated investments while deceiving investors about future revenue and falsely claiming insurance protection. Metro was required to refund Mr S £155,400.80 plus 8% interest as Metro failed to establish any valid exception to reimbursement under the CRM Code.

The Ombudsman's reasoning

The ombudsman found that Mr S was the victim of an APP scam as defined in the CRM Code because: (1) G intended to use investor funds for purposes significantly different from what was represented (personal expenses, sponsorship, and unrelated investments rather than hotel chain contract work); (2) this discrepancy resulted from dishonest deception by G's directors who knew they were misleading investors about future work and insurance coverage; (3) the fact that some investor money was used for legitimate work and Mr S received initial returns does not negate the scam nature, as these are common scam features designed to build trust; (4) Metro failed to establish any valid exception to reimbursement under the CRM Code, as Mr S had a reasonable basis for believing the investment was legitimate given the due diligence he conducted and the information provided; (5) Metro's generic fraud warning was not effective or specific enough to constitute an effective warning that Mr S ignored.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website