HSBC UK Bank Plc · DRN-5974730

The complaint Mr S complains HSBC UK Bank Plc, trading as first direct (‘First Direct’), hasn’t reimbursed him following an authorised push payment (‘APP’) investment scam he fell victim to. In bringing his complaint, Mr S has used the services of a professional representative. Within this decision, for ease of reading, I will refer to Mr S in the main. What happened As both parties are familiar with the circumstances of this complaint, I’ve summarised them briefly below. Mr S was introduced to an investment opportunity with a company, which I’ll call ‘R’ and which later became ‘V’ (for ease, I’ll refer to it as ‘V’ from here on). Mr S says he worked for a company and one of the directors, whom I’ll call ‘Mr C’, advised about investing through V – with Mr C being one of the founding directors of V. Mr S advised Mr C provided a presentation about V to him and others. Mr S believed V traded in Foreign Exchange (‘Forex’) and indices. Mr S says he also received brochures outlining the investment, saw V’s website and a client portal which tracked the investment and he spoke with Mr C about the investment opportunity for some time. Mr S says Mr C advised him that his own family and friends had already invested. Mr S says he saw how things were progressing and that everything appeared to be going well with other people receiving returns that were promised. Mr S has said he also researched another director of V and didn’t note any concerns. Based on everything he had seen and alongside the trust and relationship he felt he had with Mr C, Mr S decided to invest with V and was required to undertake an account opening process with V. Mr S says others from his company invested also. On 6 May 2022, Mr S made two payments of £10,000 each from two accounts he held with First Direct. Mr S made payments direct to Mr C’s personal account. Mr S says things appeared to be going well with the returns expected being achieved. Mr S says he didn’t withdraw any funds and left the returns to compound. On 18 May 2023, V emailed its investors. V advised that it had been working with the Financial Conduct Authority (‘FCA’) and the FCA had requested information from V on a number of details. V explained it was working with its lawyers to ensure it provided everything the FCA needed. V explained as part of the process it had been asked to temporarily pause any trading until the situation was resolved. In June 2023 a message was added to V’s website saying V had been in communication with the FCA since 18 April 2023. Mr S then became aware the FCA was carrying out an investigation into V.

-- 1 of 6 --

Mr S, through his representative, reported the matter to First Direct in July 2025 to try and recover his funds or be reimbursed his loss under the Lending Standards Board Contingent Reimbursement Model (‘CRM’) Code. This was a voluntary code that First Direct was a signatory of. The CRM Code required firms to reimburse customers who had been the victims of APP scams in all but a limited number of circumstances. First Direct responded in August 2025 advising Mr S that it had raised the scam claim, but it was still investigating the matter and considerations were being made in regard to the outcome. Mr S referred his complaint to this service at this time. First Direct in its submissions to our service advised it was awaiting industry guidance from law enforcement / FCA to confirm that V had an intent to scam investors. It also considered that Mr S had paid Mr C, and not V – so the payments weren’t covered by the CRM Code. One of our Investigators looked into the matter and upheld Mr S’s complaint. In short, they did not think it was fair for First Direct to wait for the FCA’s investigation into V to be concluded, before making a reimbursement decision under the CRM Code. Having reviewed the complaint, they felt it was more likely V was operating as a scam – and this was based on a number of factors. They also explained that Mr C, as the director of V, was one of the perpetrators of the scam orchestrated by V and Mr S’s funds weren’t used in the way he intended, and Mr S had been scammed by Mr C and V. They therefore considered the CRM Code was an applicable consideration to the payments Mr S had made and assessed Mr S’s complaint in line with the CRM Code’s provisions. In doing so they felt that Mr S had a reasonable basis for believing his investment with V was genuine, so they did not think an exception to reimbursement applied. They therefore recommended a full refund of the payments Mr S made totalling £20,000, as well as 8% simple interest from 15 days after Mr S raised his fraud claim with First Direct to the date of settlement. Mr S accepted the findings, however First Direct did not. In short First Direct considered it was appropriate and proportionate to await the outcome of the FCA/police investigation. As an informal agreement could not be reached, the complaint has been passed to me for a final decision. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. In deciding what’s fair and reasonable in all the circumstances of a complaint, I’m required to take into account relevant: law and regulations; regulators’ rules, guidance and standards; codes of practice; and, where appropriate, what I consider to have been good industry practice at the time. The main point of dispute here is whether V was operating as a scam or not. First Direct is seeking to rely on R3(1)(c) of the CRM Code to defer making a decision on this point. R3(1)(c) says: “…If a case is subject to investigation by a statutory body and the outcome might reasonably inform the Firm’s decision, the Firm may wait for the outcome of the investigation before making a decision.”

-- 2 of 6 --

So, I have considered whether it would be appropriate to delay my decision in the interests of fairness, as I understand that the FCA investigation is still ongoing. There may be circumstances and cases where it’s appropriate to wait for the outcome of external investigations. But that isn’t necessarily so in every case, as it may be possible to reach conclusions on the main issues on the basis of evidence already available. And it may be that the investigations or proceedings aren’t looking at quite the same issues or doing so in the most helpful way. In order to determine Mr S’s complaint, I have to ask myself whether, on the balance of probabilities, the available evidence indicates that it’s more likely than not that Mr S was the victim of a scam rather than a failed investment. But I wouldn’t proceed to that determination if I consider fairness to the parties demands that I delay doing so. I’m aware that Mr S first raised his claim with First Direct in July 2025, and I need to bear in mind that this service exists for the purpose of resolving complaints quickly and with minimum formality. With that in mind, I don’t think delaying giving Mr S an answer for an unspecified length of time would be appropriate unless truly justified. And, as a general rule, I’d not be inclined to think it fair to the parties to a complaint to put off my decision unless, bearing in mind the evidence already available to me, a postponement is likely to help significantly when it comes to deciding the issues. I’m aware the above processes with the investigation might result in some recoveries for V’s investors; in order to avoid the risk of double recovery, I think First Direct would be entitled to take, if it wishes, an assignment of the rights to all future distributions to Mr S under those processes in respect of this investment before paying anything I might award to him on this complaint. For the reasons I discuss further below, I don’t think it’s necessary to wait for the outcome of the ongoing FCA investigation for me to fairly reach a decision on whether First Direct should reimburse Mr S under the provisions of the CRM Code. In order to reach a decision, I’ve considered the definition of an APP scam under the CRM Code. Under DS1(2) an APP scam is defined as: “…a transfer of funds executed across Faster Payments, CHAPS or an internal book transfer, authorised by a Customer in accordance with regulation 67 of the PSRs, where: (i) The Customer intended to transfer funds to another person, but was instead deceived into transferring the funds to a different person; or (ii) The Customer transferred funds to another person for what they believed were legitimate purposes but which were in fact fraudulent.” DS2(2)(b) explains that the CRM Code does not apply to: “private civil disputes, such as where a Customer has paid a legitimate supplier for goods, services, or digital content but has not received them, they are defective in some way, or the Customer is otherwise dissatisfied with the supplier” Of particular relevance here is whether Mr S transferred funds to Mr C (to be invested with V) for what he believed to be legitimate purposes, but which were, in fact, fraudulent.

-- 3 of 6 --

It’s evident that V had some features that gave the impression of it operating legitimately. There are identifiable individuals associated with V who held in-person and online events to promote the investment. And many people who lost money had been introduced to the scheme through personal recommendations (sometimes by people who’d successfully withdrawn significant ‘profits’ from the scheme). There is also evidence that some of the money that was received by the founding individuals at V (though not the limited company V) did end up with a foreign exchange (‘Forex’) platform (which wasn’t FCA regulated but was part of a group of companies – of which one was FCA regulated). It also appears some funds sent to V’s bank account were potentially converted into cryptocurrency and sent to the Forex platform. However, I’ve found the following facts to be persuasive evidence that V was operating as a scam: • We are now aware that V’s claims of being at least in the process of being regulated with relevant bodies such as the FCA in the UK and the CSSF in Luxembourg are false. • V’s account provider has shown that when V applied for accounts it lied at least twice, this was about partnering with an FCA authorised trading exchange and that it was regulated. • Less than half of the funds sent to the two founding individuals of V was potentially used for the intended purpose of Forex trading. Whereas investors were led to believe they would immediately be moved to an FCA regulated trading account to be used in Forex trading. • Of the investors’ funds that were sent to V’s business account, these were either sent to a cryptocurrency exchange platform or paid to other investors as withdrawals. Investors were led to believe they were investing with a regulated entity and that their funds would be deposited in a regulated trading account. It wasn’t advertised to investors that their funds would be moved/invested into unregulated cryptocurrency. Furthermore, approximately 20% of the funds moved to the cryptocurrency exchange platform weren’t subsequently forwarded to the Forex trading account. • There is no evidence to substantiate V’s claims around the profits they say they were able to generate via Forex trading. • The returns from the Forex platform are significantly less than the returns paid to investors, suggesting returns were funded using other investors’ money and weren’t profits made from investing. Taking into account all of the above, I’m satisfied, on the balance of probabilities, that the money that was sent to Mr C was not used for its intended purpose. The evidence suggests that Mr S wasn’t involved in a failed investment but a scam. Returning to the question of whether, in fairness, I should delay reaching a decision pending developments from external investigations, I have explained why I should only postpone a decision if I take the view that fairness to the parties demands that I should do so. In view of the evidence already available to me, I don’t consider it likely that postponing my decision would help significantly in deciding the issues. There is no certainty that any prosecutions will result from the FCA’s investigations nor what, if any, new light they would shed on the evidence and issues I’ve discussed.

-- 4 of 6 --

So, as I’m satisfied Mr S has most likely been the victim of an APP scam orchestrated by V, I’ve considered whether he should be reimbursed under the CRM Code. Is Mr S entitled to reimbursement under the CRM Code? Under the CRM Code, there are generally two exceptions to reimbursement: • Mr S made the payments without a reasonable basis for believing that they were for genuine goods or services; and/or Mr C/V was legitimate. • Mr S ignored what the CRM Code deems to be an “Effective Warning”. And importantly, when assessing whether it can establish these things, First Direct must consider whether they would have had a “material effect on preventing the APP scam”. I have considered whether Mr S had a reasonable basis to believe V was legitimate and was providing a genuine investment product. In doing so, I have given careful consideration to how Mr S was introduced to V. I think it is an important consideration here in determining whether Mr S had a reasonable basis of belief that V was legitimate. Mr S worked for a company where Mr C (one of the founding directors of V) was also a director. Mr S says due to that working relationship, he trusted Mr C. Mr S says Mr C promoted investing with V in a presentation and spoke with Mr S and others. Given Mr C was one of the founding directors of V, it’s understandable that he undoubtedly would have been persuasive in promoting investment with V. When I consider this, and couple it with the sophistication of this scam, so the account opening process, V’s website, the client portal and the ability to track the supposed investment, I can understand why Mr S felt the investment was a genuine one at the time. I accept some of the claims made by V about the returns it could generate seem unlikely. I note the marketing materials set out that V’s worst month for returns was 9%, and its best month provided a return of 23%. But, and importantly, alongside this I also have to weigh up what Mr S had been told about V by Mr C and what he had seen with others achieving in returns. I think the sophisticated aspects of the scam, particularly with Mr S being introduced by someone he thought he could trust, and the ability to see how investments were performing on a daily basis on V’s platform, outweighs the concerns that Mr S perhaps ought to have had about the returns being claimed. On balance, I think there was enough to reasonably convince Mr S at the time that this was a genuine investment company. With this in mind, I don’t think Mr S made the payments without a reasonable basis of belief that V and the investment itself was genuine. I have also considered whether First Direct can rely on the exception to reimbursement that Mr S ignored what the CRM Code deems to be an “Effective Warning”. I note that Mr S chose “friends and family” as the payment purpose – and that was the warning First Direct therefore provided. I don’t think the warning provided is an effective warning as defined by the CRM Code. It doesn’t speak to the scam Mr S was falling victim to. I appreciate Mr S didn’t choose the relevant payment purpose when making the payments. But Mr S had known Mr C for some time in a work capacity – so I don’t think it was so unreasonable that Mr S selected this payment purpose when making the payment.

-- 5 of 6 --

I’m also mindful the CRM Code explains that a firm, in assessing whether an exception to reimbursement applies such as ignoring an effective warning, has to take into account whether it would have had a “material effect on preventing the APP scam”. Here Mr S had no reason to believe that V wasn’t a genuine investment company at the time. So even if had Mr S selected a more accurate payment purpose or even if First Direct were to have provided a more relevant or tailored warning to Mr S about investment scams – I think it is fair to say it wouldn’t have had a material effect on preventing the scam such was his belief in Mr C and V and that things were legitimate. So, I do not think an exception to reimbursement can be applied for this reason in any event. Overall, I do not consider it necessary to await the outcome of the FCA investigations into V and any subsequent proceedings. I am satisfied, based on the evidence available, that Mr S was more likely than not the victim of an APP scam. And his fraud claim is therefore covered by the provisions of the CRM Code. I’m also satisfied no exceptions to reimbursement under the CRM Code apply. So, it follows that I’m satisfied First Direct should reimburse Mr S under the provisions of the CRM Code. And First Direct is entitled to take, if it so wishes, an assignment of the rights to all future distributions to Mr S under the processes relating to the FCA investigation and any potential compensation that may be returned to victims. In relation to compensatory interest, I think it should be paid from 15 days after First Direct received Mr S’s scam claim. I’m satisfied there was sufficient information available to First Direct at that time to conclude that Mr S had been the victim of a scam and that it wasn’t necessary to wait for the outcome of any ongoing investigations. Putting things right I uphold this complaint. HSBC UK Bank Plc, trading as first direct, should pay Mr S: • £20,000 lost to the scam orchestrated by Mr C/V; and • 8% simple interest on that amount from 15 days after it received Mr S’s scam claim to the date of settlement. My final decision For the reasons given above, I uphold this complaint. I direct HSBC UK Bank Plc, trading as first direct, to put things right as set out above. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr S to accept or reject my decision before 22 April 2026. Matthew Horner Ombudsman

-- 6 of 6 --