/ Money

Scam watch: scammer persuaded me to ‘invest’ £10,000

Coal painted gold

If you’re looking to invest a hefty sum of money, where should you put it? Is investing in Binary Options a good… option? Probably not, especially if the trading company is run by scammers.

Janet Swift from Gloucester said: After my husband lost his job, I was looking to invest some of our pension funds, and found a website selling Binary Options. Its products were professionally presented so I invested £500, and was told I’d receive a call from a trader to discuss my investment options, but never did.

I got back in touch, and was called by a ‘senior trader’ who apologised for the lack of communication. He told me that, although he only dealt with high net-worth clients, he would take on my custom as a goodwill gesture if I invested £10,000.

He convinced me to do so, but despite repeatedly asking where my money was being invested, I got no answer. I then realised it was a scam. I reported the case to the police and to my bank. This prompted the senior trader, who had been using a false name, to get back in touch via Skype. He offered to repay the £10,000 if I cancelled the claim. I’m sure he has no intention of doing so.

Avoid risky investments

We say: Binary Options are an extremely high-risk gamble that we’d warn any investors to stay away from, even with a trusted broker. They are not regulated in any way, so your money is always at risk. And scammers’ tactics often involve encouraging you to throw good money after bad.

Despite providing evidence of your communications with the trader, your bank initially refused to provide an immediate refund, as you willingly handed over the funds. However, our Money Helpline team helped to escalate your claim, and you got your £10,000 back.

Comments
Member

These really are a gamble, not an investment. They are sometimes called ‘all-or-nothing options’. There are far better ways to invest safely and get a decent return.

Always count to ten when thinking of any savings or investment product that has no escape clause.

Never make an investment commitment over the telephone.

Avoid all forms of unregulated investment.

Member

Joe, you say “However, our Money Helpline team helped to escalate your claim, and you got your £10,000 back.”. Was this returned by the scammer or refunded by the bank?

Member

Hi Malcolm.

Our Money Helpline team helped the member dispute the transaction through her bank. It wasn’t willingly returned by the scammer.

Member

Joe, I’m not sure what you mean by “dispute the transaction”. Did the bank retrieve the money from the scammers account and pass it back to the member?

Member
City of London Trading Standards says:
25 August 2015

This doesn’t make sense. The bank have no liability to repay the money. Can you clarify exactly what happened.

Member

Perhaps we gave to interpret “it wasn’t willingly returned by the scammer” as meaning “it was returned by the scammer but reluctantly or under protest”.

Member

Sorry I should have been more clear.

The Money Helpline team helped the Which? member gather evidence to support her chargeback claim.

More info on chargeback at http://www.which.co.uk/consumer-rights/problem/how-do-i-use-chargeback

Member

Joe, thanks. To be clear, the member paid with a debit card and the bank then recovered the money from the merchant’s (i.e. scammer’s) bank – is that the case?

Member

Correct.

Member

I have every sympathy with the lady scammed out of £10,000 and all credit to the Money Helpline team in helping to recover her cash.
However it doesn’t sound like she did much research before handing over the cash. It seems a glossy website and a persuasive fellow on the phone is just about all it took. You don’t have to be a very sophisticated scammer to manage that.
I think a bit of research to see what other investors think before parting with any cash is pretty fundamental as a minimum. I bet this lady is a lot more cautious next time.

Scammers are becoming ever more inventive and we all need to up our game to prevent being turned over. I’d suggest never “invest” if they approach you, never make any unregulated investment and when you do find a potential investment opportunity check them out very thoroughly by researching what others have to say before you part with a penny. No investment is totally risk free but the risk can be kept to a minimum and a reasonable amount of research will defeat the vast majority of blatant scammers. And remember what they use to say back when things like unit trusts and endowments were popular “investments can go both up and down”.

Having said all that, most of which is pretty obvious the cynic in me can’t help thinking the article is really a thinly veiled advert for “Which Money Helpline”. Nothing wrong with “Which Money Helpline” but I’d rather an advert for such was a bit more open and obvious. There again perhaps I’m just being a bit too cynical?

Member

Hi Chris, the goal of this Convo is to get you talking about similar scams. We just wanted to give credit to our Money Helpline team who worked on this, and if people feel like clicking they can. But the main purpose, as with any Convo, is to start a debate. Thanks for your comment 🙂

Member
Michael P says:
11 July 2017

Well, was the money recovered from the fraudster or did somebody else pick up the tab? That’s not at all clear to me.

Member

It seems a little harsh to call this a scam when it is a legitimate way to get rid of your capital. Mrs. Swift approached them – was not cold-called – so where was the scam?

A] It appears the big lessons from this are DO Proper Research before parting with money.
B] Using on-line to make payments aids unwise decisions. A recommendation for easy banking ? : )

As an observation – it would make these Conversations a bit punchier if :
– Which? had the courage to name the Option site so we could see the snares they lay,
and also the Bank who were a little dilatory in protecting their customers interests

Member
Edward Allan says:
26 August 2015

To all of you who think it is the fault of the victim that they were deceived I would remind you that obtaining money by deception is, and has been, for many years a crime.

An individual who has just been defrauded, sometimes out of retirement or life savings cannot match the financial weight of the company that has taken their money.

[This comment has been edited for breaking our commenting guidelines. Thanks, mods.]

Member
Michael P says:
11 July 2017

So just what was the bank’s responsibility? Surely not to check to whom the lady issued a cheque but to ensure the transfer of the cash when instructed to do so.

Member

I think the ‘scam’ in cases like this is in appealing in populist ways, through advertising and pressure telephone marketing, to people who are completely unaware of the risks and conditions associated with these completely unconventional financial schemes. Options trading has been around for years but it was generally not marketed openly other than to people known to have an existing substantial investment portfolio or who were familiar with and active in sophisticated financial dealings. Then along came the internet and it was easy for anybody to get access to the websites and actually start trading with very little support or guidance and certainly no fact-find process to assess the suitability of the product for their financial situation. That is the tell-tale sign that they are not investments but bets, and therefore unregulated. Some of the language used in the binary options business is more akin to an on-line casino than a respectable investment scheme.

In the case of Mr & Mrs Swift it unquestionably deserves to be called a scam because the trader used a false name and refused to say what the £10,000 stake was being placed on. They were obviously left under the impression that their money was being invested and were not informed that it was being used as a stake that could disappear in a trice.

It is easy to see how, in an economic climate characterised by historically meagre returns, the appeal of high-speed trading with enormous potential profits can attract people who need more money now and not in twenty years’ time. The fact that on a YES/NO trade [‘bet’] on whether a market index will be up or down in five minutes’ time could also see a total wipe-out of the stake is not given any prominence in the marketing – it’s all about the upside.

I believe the Swifts got their money back only because of the dodgy dealing by the brokerage that enticed them in, not by virtue of the inappropriate nature of the scheme for their circumstances. As Diesel says, their bank was a little dilatory given the allegations of wrongful conduct which amounted to taking money under false pretences, and I think that says it all about the lack of experience and customer knowledge at management level in retail banking today.

The volatility of financial and commodity markets, and their related indices, at the present time demonstrates the colossal risks that are in play. The whole world is effectively trying to second-guess what the notoriously uncommunicative Chinese authorities are going to do next unconstrained as they are by the conventions of the major international capital markets.

You want a good time on a roller-coaster? Best go to Blackpool. You fancy a bit of quick fun and perhaps some easy money on a bit of guesswork? Stick to the Treble Chance.

Member

The lady apparently went looking for investment opportunities on the internet and was not, seemingly cold called. Giving money to an organisation you have no knowledge of in an area you are seemingly totally ignorant of is folly. Presumably normal investments were insufficiently attractive. She was lucky, apparently, that subsequent contact with the people running the site proved fraudulent which allowed her to have the bank reclaim her money. At least that seems to be the case under chargeback if she used her debit card.

The moral again is to stay within your area of knowledge, or find a trusted independent financial advisor, and pay them, to help with financial matters beyond your knowledge. No one should expect redress for making a poor financial decision.

If I have misunderstood then I’m sure Which? will enlighten me 🙂

Member

On the evidence given us I think that is the correct analysis Malcolm.

I happen to think that many people are unjustifiably dissatisfied with the rates available on the high street in banks and building societies which is what drives them to look for what they think will be high performing investments and without stopping to think that for every increase in reward there is an increase in risk. Whether their behaviour is a result of innocence or greed is irrelevant – there should not be an expectation that they will be able to get their money back if they put it in a bad place.

I read in the last few days that there had been a massive increase in complaints to the Financial Ombudsman Service over packaged bank accounts. Leaving aside the complaints that customers were allegedly transferred to such accounts without their knowledge, or that their request to revert to their previous current account was not acted upon, it would appear that most of the complaints were that the ‘package’ included insurance cover or other facilities [like commission free cash machine withdrawals abroad] that they could make no use of and that the interest on their balances was significantly less than the monthly charge for running the account, so therefore miss-selling had taken place. Apparently the Ombudsman is only upholding ten percent of those complaints [this recognises that the bank concerned has made an appropriate settlement offer in many cases]. These accounts are not complicated or sophisticated investments. There are leaflets and full descriptions of them in branches, in newspaper adverts, and on-line. Staff are available in every high street branch to explain the way these accounts work and to answer questions. The charges are displayed up front and the contents of the ‘package’ are all shown. But such is the complaints culture now, possibly due to the PPI miss-selling issue, that people are going straight to the Ombudsman or using claims management companies to seek redress rather than raise it with their bank or building society in the first instance.

I sometimes wonder what more could reasonably have been done to help people avoid an unwanted or an unsuitable current account . There is no doubt that better education in personal money management is needed, but also far too many people seem unable to do the relatively simple calculations required to tell them whether they will be in or out of pocket if they convert to a packaged current account. It’s about time we stopped blaming the banks for people who step into a financial puddle because of their own lack of reasonable care and attention.

Member

John, I totally agree. People need to take responsibility for their own decisions and not assume someone will repay them if it goes wrong. Who repays them? In the end, all of us, through extra charges. If you are deceived into taking an unsuitable product that is a different matter but my experience of packaged bank accounts is that the literature provided all the relevant information.

Member

It’s wandering away from the topic a little bit, but the Nationwide keeps sending me e-mails and mailshots trying to get me to switch from my Flexaccount to their packaged current account called Flexplus. It would be very lucrative to them if I did. I am not interested in any of the fringe benefits linked to the Flexplus account so it comes down to a straight financial comparison. I actively manage my Flexaccount so the average credit balance each month is not high – probably no more than £500. The 3% a.e.r. interest payable on balances up to £2,500 would therefore only produce £15 a year [before tax] for me but I would have to pay £10 a month [£120 a year out of taxed income] to run the account. It is possible that anyone with a similar average balance and using most or all of the features and benefits could be better off so it is potentially a good account, but people do need to make a careful calculation before switching and then not complain if they haven’t made it work for themselves.

Member

John, i assume you mean interest would be up to £75 a year before tax? As you say it depends upon whether you would make use of the benefits that are offered. I think Which? give it a good rating for those who do. We do need to use our brains when evaluating anything offered to us. 🙂

Member

Unfortunately not Malcolm.

In the example I set out above, assuming my average current account balance over the course of a year is £500, the 3% a.e.r. would only produce £15 before tax. The 3% is only payable on balances up to £2,500, and yes, if you kept an average balance of £2,500 in a Flexplus account it would earn £75 a year before tax, but no interest is payable on any amount in the account above £2,500.

To maintain an average balance of £2,500 with the usual outgoings each month would mean keeping £3-4,000 there for periods at 0% interest on anything over £2,500 thus diminishing the overall rate of return and certainly not making it an attractive account, especially with the maintenance charge of £120 a year.

With an average balance in the £500 – £1000 range, as I said previously, it is potentially a good account if you can make good use of its benefits and features. The vehicle breakdown & recovery assistance and the worldwide family travel insurance cover included [with other benefits] in the package would more than offset the cost of running the account if you are happy with having such services provided in that way.

The aspect that Nationwide don’t go out of their way to explain is the ‘average balance’ which is not mentioned directly in their literature but is the only conceivable construction that can be put on their terms. They also allow people to get confused between the standing charge which is paid monthly and the interest which is an annual rate, and the reference to £2,500 [which is the sort of sum that goes into many current accounts each month] deflects people’s mental arithmetic so they end up thinking they will earn £75 a year. Furthermore the Nationwide does not draw attention to the ‘after tax’/’before tax’ distinction on the monthly payment made and the annual interest received. In my example, it might look as though the charges exceed the income by £105 but depending on the person’s tax position the deficit could be £140. For anyone who runs on or near empty for a few days at the end of each pay month, even if offset by other ‘benefits’, this account would take some managing to make it pay.

I certainly think the Nationwide should have made the terms much more easy to understand. As you say, we need to use our brains when evaluating anything offered to us, but the demands on the standard Mk.1 brain made by this account are unreasonable.

I am a longstanding Nationwide customer and generally have a high regard for their products and their business operation. But with this account I can see how easy it is for people to be drawn into it but eventually find that it is disadvantageous and could leave them worse off. I do not know what degree of suitability analysis they go into with customers before accepting an application to open one of these packaged current accounts.

Member

John, the reason I queried your interest was because the high rate offered means it is worth keeping the current account topped up to the maximum. We run one with a savings account as well and simply transfer money online to keep it on the limit. Not much effort and it takes advantage of the high rate.

Member

Thanks Malcolm. I am sure your approach to managing the current account is good for you but I tend to run mine the other way keeping a low average balance and putting any additional money to better use elsewhere. Moreover, having had free banking for decades, I don’t like the idea of having to pay £120 a year out of taxed income for the privilege. and then being effectively forced to use certain services in the package in order to recoup it. We all have our different approaches but the important thing is to understand the account so you’re not taken by surprise when it doesn’t produce the golden egg.

I think I’ve now gone too far away from scams and I am worried that the Nationwide will become guilty by association.

Member
Alan F says:
2 January 2017

Hi J and M. Interestingly I share both your views. I changed to Flex plus because of all the “fringe benefits” and the return on £2.5K balance, They didn’t ask – I applied. The bottom line is use your brain to see if it works for you, and not expect some-one else to bail you out. Thanks (I don’t work for them!)