Investment Scams : Your Options for Recovering Lost Money

We understand the devastating impact which scams can have – both financially and emotionally. We also understand just how hard it is to work out the best way of getting your money back. 

In this blog, we outline the main options available to scam victims: from bank reimbursement to legal and professional negligence claims. It is aimed at people who have lost money to large investment scams such as Ponzi schemes, often in the form of mini-bonds or loan notes. 

This list is not exhaustive and the options you are able to pursue will depend on the unique circumstances of your case, so it’s vital that you seek advice as soon as possible. If you contact Refundee and ask to speak to our Group Action team, we would be more than happy to talk you through your options. 

It’s important to note that there are some options that carry little to no up front costs for consumers and do not have “negative cost implications” if you are unsuccessful. These options are the FOS process and insolvency. Legal action can be fully funded which removes up front costs, but also generally means a lot of any redress is taken up by the funding and legal fees. 

1. Bank Reimbursement Schemes and using the Financial Ombudsman Service

No upfront costs and no negative cost implications

If eligible, the most realistic and cost-effective way to get your money back in a Group Action case is via bank reimbursement schemes. This is the option that Refundee specialises in and has had a huge amount of success with.

Banks have clear regulatory obligations to reimburse scam victims in certain situations. These rights derive from the Contingent Reimbursement Model Code, Mandatory Reimbursement, or sometimes from other regulatory or industry standards which banks are subject to. 

Depending on the circumstances of your case, this option may involve taking action against your bank, or the fraudster’s bank – or both. In a significant number of cases, banks put up a fight by falsely labelling a scam as a civil dispute, telling you it was your own fault or by saying that they can’t make a decision until the police have finished their investigation. But if they refuse to refund you, we can appeal their decision using the Financial Ombudsman Service, which deals with complaints. This is a regulatory, rather than a legal process so you do not need a lawyer. Our track record proves that the Financial Ombudsman Service will uphold cases that are properly evidenced – which is what we are experts in doing. 

This is a process you can do yourself for free. At Refundee, we are transparent about this and have even produced a guide on how to claim yourself. 

However, if your case is complex or you would like to be supported throughout the process, you may prefer to appoint a regulatory expert like Refundee to fight your case. Choosing who should handle your case can feel overwhelming, so we’ve put together a useful guide on choosing a professional representative here. 

It is important to note that the Financial Ombudsman Service has award limits which currently stand at £455k per case. Therefore, if you’ve lost much more than that, this might not be the best option or could be an option you use alongside others.  

2. Formal Insolvency Action 

Upfront costs are possible but there no negative cost implications

A formal insolvency process is a legally binding procedure used when a company can no longer pay their debts or owes more money than they have assets to cover.

Think of it as a referee stepping in to pause a chaotic game, take control of the rules, and make sure everyone is treated as fairly as possible according to the law.

Depending on the situation, a formal insolvency process aims to do one of two things:

• Save the business by reorganizing its debts into a manageable payment plan so they can keep operating and recover financially.

• Close down the business, collect whatever assets exist, sell them off and divide the money fairly among the investors or lenders, and then officially close the business down.

The process is run by a licensed and regulated insolvency practitioner, a neutral third party who takes control of the company.

However, because fraudsters are good at spending money, realistically, an insolvency practitioner will only achieve partial reimbursement for scam victims at best. Most commonly, there is no money left for victims at all. 

However in our view, this is still an important avenue to pursue. A good and independent insolvency practitioner will be able to obtain evidence about the fraud that can increase the chances of success via other routes, such as the Financial Ombudsman Service.

Be warned though: if a fraudulent company initiates their own insolvency process, and appoints their own insolvency practitioner, it should be treated with caution. In some cases, they may appoint a small, inexperienced firm that does not have the knowledge or resources to investigate thoroughly. We’ve also seen evidence in cases before where a conflict has arisen when a fraudulent company has appointed its own insolvency practitioner. In one case Refundee was approached about, the insolvency practitioner appointed had been photographed on a skiing holiday with the suspected fraudster. Ultimately, it was too late for us to intervene in that case and the appropriate actions were not taken by the appointed practitioner. This highlights the need to seek advice from a specialist company like Refundee or an experienced insolvency practitioner as soon as possible. 

Our view is that an insolvency process is complementary to going via the Financial Ombudsman Service process and it’s not an either/or. 

3. Civil Actions 

Upfront costs and negative cost implications‍

Often, a non-specialist, high street solicitor will recommend civil action because they are unaware of bank reimbursement schemes and do not have a full understanding of insolvency processes. It is an easy sell because to a lay person, suing the perpetrators in court may sound like the most obvious option. However, there are huge risks and we see that this approach is often a case of throwing good money after bad. 

Fraudsters are very good at spending and laundering money. This means by the time your case reaches court, there is unlikely to be any money left for them to pay you back – even if you win. Even worse, going down the wrong path is time-consuming and can result in significant delays. This may mean you miss the opportunity to recover your funds via the bank reimbursement route because of strict rules around how quickly you need to pursue a bank claim. 

When legal action is taken, it’s very rarely done on a no-win no-fee basis due to the risks involved and low chances of full reimbursement. This means there can be significant costs linked to the process. The best case scenario is that enough is recovered to only provide partial reimbursement of investors losses. This can be lucrative for lawyers, but in our view, is often not the best option for clients. 

4. Private Prosecutions

Upfront costs and negative cost implications

A private prosecution is a criminal case initiated by a private individual, business or organisation – instead of a state authority like the Crown Prosecution Service. 

Private prosecutions differ from suing fraudsters in a civil case, because it can potentially lead to custodial sentences. Money can also be recovered for victims under the Proceeds of Crime Act. If your primary aim is to achieve justice, and hold the scammers accountable for their actions, then it is a serious option. It can be a useful recovery tool if it is known that the individual has assets and your losses are significantly beyond the Financial Ombudsman Service’s award limit, which currently stands at £455k. We know a firm that does this work to an exceptional level.

However, it’s not without risks. There is no legal aid for private prosecutions so you must pay for legal representation and investigations yourself initially. If your case is successful, you may be able to recover these costs. The up front costs are usually significant and are therefore out of reach of most people. Funding options are however available but repayment of the funding will usually take up significant amounts of your redress when you do win. 

In terms of recovering your money, private prosecutions also face similar challenges to civil actions: often fraudsters will have no money left to pay back victims and so it is not an option for most victims. 

5. Professional Negligence Claims

Often up front costs and often negative cost implications (depending on funding arrangements)

You may also have the option to pursue claims against “enablers” of a fraud, or other parties who bear some responsibility. 

You might also be able to take action against solicitors, accountants, pension providers or “introducers”. However, because usually these parties will not be regulated by the FCA, you cannot do this through the Financial Ombudsman Service. Instead, you will need to take legal action. If you win, and the party is unable to reimburse you for your loss, it’s possible that they will have insurance which will pay out instead. The key point here is that even if you win, you might not see the money come back to you if it’s not an established firm with deep pockets, or they do not have insurance. 

However, as with other civil actions, the main issues with this option are the expense, potential up-front costs – and the fact that even if you do win, you are likely to only receive a partial reimbursement, and be hit by significant legal or funding fees. If you have a strong case, you may be offered assistance on a no-win no-fee basis. Again, this can be a great option for you to run alongside another action (e.g. your loss under bank reimbursement schemes is not fully covered). 

Summary: Your Options for Recovering Money 

If you’ve been the victim of scam, it’s important you are aware of all the options available to you. The best option depends on the circumstances you find yourself in, but generally if you can avoid up front costs and other negative cost implications, you should. 

Remember: 

• If available, the bank reimbursement and Financial Ombudsman Service process is almost always the best approach. You can speak to Refundee to discuss whether this option is available to you. 
• Be wary of throwing good money after bad with expensive legal claims. You could end up much worse-off.
• Ask why a representative is not offering you a no-win no-fee deal. Often it’s because they are not confident in chances of success. 
• Watch out for hidden fees at law firms that claim to be “no-win no-fee”. For example, they sometimes apply further charges along the way to take your case to the Financial Ombudsman Service or charge punitive cancellation fees. 
• Watch out for marketing tactics. Firms will sometimes pretend they are pursuing a wide range of options to help you as a marketing ploy, to give you the impression you have a lot of available options. In reality, they will simply pursue your case via the Financial Ombudsman Service and, if that is the case, you should use a firm like Refundee that is best placed for such cases. 
• Get involved early in insolvency processes and speak to Refundee if an investment you’ve made has failed and you expect foul play. You don’t want the suspected fraudsters to control their own choice of insolvency practitioner.

Speak to Refundee

If you've lost money to a scam, get in touch for a free assessment of your case. We'll tell you honestly whether we think you have a claim and how we'd pursue it. If you think the investment you have made could actually be a scam, you should also reach out. 

Refundee specialises in Group Action cases and we have recovered more than £150 million for our clients so far, with a large proportion coming from this. We can provide you with clear and expert guidance on your next steps of recovering your money. 

And it won’t cost you anything/we won’t ask you to pay anything unless we get some or all of your money.

More about Refundee

Here are the technical bits:

Refundee Ltd is a claims management company authorised and regulated by the Financial Conduct Authority in respect of regulated claims management activity FRN: 937096.

Registered with the Information Commissioner's Office; registration number: A8986071.

Registered office address: Refundee, 3rd Floor, 86-90 Paul Street, London, EC2A 4NE.

Registered as a company in England & Wales; number: 12855931.