Nationwide Building Society · DRN-5672255

The complaint Mr S is unhappy that Nationwide Building Society (‘Nationwide’) won’t refund him after he reported being the victim of a scam. What happened Mr S worked for a company which focused on property business training. He says that the director of the company introduced him to an investment opportunity with a company I shall call ‘B’. B claimed that they had developed an algorithm that enabled them to make an excellent return on the volatility of the stock market as it opened each day. The investment took the form of a loan to B which would enable them to trade on the stock market and in foreign exchange (‘forex’). Mr S’ loan agreement with B stated that he would receive 30% returns from his investment, which would be paid alongside the loan capital after 12 months. Mr S made the following payments to B in connection with his investment: Date Payment 1 June 2020 £10,000 sent to B 1 June 2020 £5,000 sent to B 22 October 2020 £10,000 sent to B but returned as beneficiary account closed 22 October 2020 £10,000 sent to B but returned as beneficiary account closed 22 October 2020 £10,000 sent to another account associated with B 22 October 2020 £10,000 sent to another account associated with B 12 October 2021 £10,000 sent to another account associated with B 12 October 2021 £10,000 sent to another account associated with B 12 October 2021 £10,000 sent to another account associated with B 12 October 2021 £10,000 sent to another account associated with B Total loss: £75,000 Mr S says he never received any returns and that he realised the matter was a scam when “it all came out” and investors took B to court. He reported the matter to Nationwide as a scam through his professional representatives. Nationwide said that the matter was a civil dispute as they thought B was a genuine company which had gone into administration. As a resolution couldn’t be reached, Mr S brought his complaint to the Financial Ombudsman Service. Our Investigator looked through the complaint and upheld it as he thought the matter was a scam. Nationwide requested further evidence relating to how we had reached this conclusion but we were unable to provide this, so the matter has come to me for a final decision.

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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, I’m required to take into account relevant law and regulations; regulatory rules, guidance and standards; codes of practice; and, where appropriate, what I consider having been good industry practice at the time. Has Mr S been the victim of an APP scam, as defined in the CRM Code? At the time of the payment, Nationwide was a signatory to the Lending Standards Board’s Contingent Reimbursement Model Code (‘the CRM Code’). The CRM Code states that it does not apply to private civil disputes, so Nationwide believe they have acted fairly in declining the claim for being a civil dispute. Mr S believes the matter is a scam. The relevant section of the CRM Code defines an APP scam as: “The Customer transferred funds to another person for what they believed were legitimate purposes but which were in fact fraudulent.” So for me to find that Mr S had been the victim of a scam, rather than a civil dispute, I would need to be satisfied that: (a) There was a misalignment between Mr S’ purpose for making the payment and B’s purpose for procuring the payment; and (b) The difference between the two purposes must be due to dishonest deception on the part of B One of the key considerations here is thinking about what were B’s intentions from the start of the process – did B intend to dishonestly deceive Mr S? I appreciate there are challenges in establishing what another person’s intentions were and that I cannot know for sure. So I have considered all the available evidence to decide on balance what I think B’s intentions are likely to have been. The threshold for me saying fraud has occurred is a high one, (though not as high as in criminal proceedings). My role is to decide if I think fraud is more likely than not to have happened. It isn’t enough for fraud to be one of a number of plausible theories for what happened, it has to have been more likely than not to have occurred. Having looked at everything submitted, I think the matter was, on balance, a scam. Whilst there is some evidence of B taking part in forex trading to the sum of just under £5 million, it is disproportionate to the amount of funds received by clients to trade, which was around £28 million in total. Further to this, the figures we have seen suggest B made a loss on its trading activity, yet £19 million was still paid to investors as returns. I think the facts above suggest that something was untoward with the investment opportunity as customers were not receiving genuine returns, and the majority of money wasn’t actually being traded. This pattern is consistent with fraudulent schemes which pay customers so that they think their investments were performing well, which induces them into investing more. This suggests to me that B was a Ponzi scheme. Nationwide wanted to see if the funds invested by Mr S were amongst those that were legitimately traded. However, the complex movement of funds mean its not realistic to come to a firm conclusion on that point.

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So, for the reasons above I think the matter was, on balance, likely to be a scam. Having reached this conclusion, I have gone on to consider if I think Mr S is entitled to reimbursement under the CRM Code. Should Mr S be reimbursed under the CRM Code? Under the CRM Code, a firm may choose not to reimburse a customer if it can establish that: • The customer ignored an effective warning in relation to the payment being made; or • In all the circumstances at the time of the payment, in particular the characteristics of the customer and the complexity and sophistication of the APP scam, the customer made the payment without a reasonable basis for believing that: o the payee was the person the customer was expecting to pay; o the payment was for genuine goods or services; and/or o the person or business with whom they transacted was legitimate In this instance, I agree with our Investigator that Mr S did have a reasonable basis for believing that the investment opportunity was legitimate: - Mr S was introduced to the investment by his boss who had invested and also helped sell it to others. I think this would have given Mr S a strong sense that the investment was legitimate as his boss had a personal interest in its success. - Mr S attended an online call with other investors where the investment was explained persuasively, and case studies of successful investors were presented. So he would have been reassured that others had received returns, a sign that it was legitimate. - Mr S felt the presentation given on B was professional and that the people delivering the presentation were knowledgeable on the subject, which would have further reassured him that the opportunity was legitimate. So based on the reasons above, I think Mr S had a reasonable basis for believing that the opportunity was legitimate and so Nationwide ought to reimburse him under the terms of the CRM Code. Putting things right As both parties will be aware, I have given great thought to the fact that Mr S was also selling the investments to other victims and there was the potential that he had earnt commission for this. It would not be fair for Mr S to receive the total reimbursement of his claim if he had also benefitted from commission payments from selling the investments, so I did ask Mr S a number of questions regarding any commission schemes connected to selling B’s investments, as well as requesting evidence to support his claim that he didn’t receive commission for selling B’s investments. Mr S explained that B did offer a referral scheme relating to new investors where sellers could get the equivalent of 10% of a new investor’s deposit added to their own pot. He explained that the ‘pot’ was meant to be an investment account with B. He said that he never received any funds or any additional funds into his account, and he didn’t know if any of his referrals to B actually converted into successful sales. Mr S provided his bank statements and wage slips as evidence that he didn’t receive commission from B. Mr S’s wage slips do show payments labelled “commission” but he explained that this was to do with commission from selling property training courses rather than investment sales.

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I think this is plausible as Mr S does work for a property training company and I can see that he was being paid commission before he began to sell B’s investments. I also couldn’t see any evidence from receiving bank statements that Mr S was paid commission by B, either by a direct monetary payment, or by being given additional investment capital in an investment account with B. As a result, I’m satisfied it’s more likely than not that Mr S hasn’t benefitted from any sales commission from B and so reimbursement should be paid in full. I’m aware that there is an ongoing police investigation into B. If any funds are available to be returned to B’s investors as a result of this investigation, then Nationwide could take an assignment of rights over those funds, to ensure complainants don’t benefit from double recovery. My final decision I uphold this complaint against Nationwide Building Society. If Mr S accepts, Nationwide Building Society should: - Reimburse Mr S for his total loss, minus any returns. As I can’t see any evidence that Mr S received any returns or commission, I am saying that the total to be reimbursed is £75,000. - Pay 8% simple interest per year on this amount from the date that the claim was declined to the date that the funds are reimbursed. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr S to accept or reject my decision before 21 April 2026. Paula Lipkowska Ombudsman

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