I lost £190k in a Ponzi scheme, but Barclays says it’s not a scam

‘The claim has been deemed a Ponzi scheme and not a scam. It is still fraud and it is still criminal but we won’t be able to investigate it as a scam.”
This is from a telephone conversation between Ruth Fretwell and a member of the fraud investigation team at her bank, Barclays.
Fretwell, 63, from Brighton, had inherited £190,000 from her mother. She invested the money in a property development scheme between November 2020 and July 2021.
When the scheme failed in 2022, Fretwell hoped that she would be refunded under a voluntary code for banks to pay back victims of fraud who are duped into sending money to a scammer’s account. The code was made mandatory last month, and a cap of £85,000 on refunds was introduced.
But Fretwell was shocked when Barclays said it would not refund her — because it had deemed that the scheme she invested in was a Ponzi, a type of scam where new investors’ money is used to pay profits to earlier investors in a business that may not exist, or one whose profitability has been exaggerated to lure investment.
Fretwell, who was introduced to the scheme by a friend, was one of about 140 people who invested a total of £30 million between 2019 and 2022.
The scheme, which we are not naming as it is still being investigated, invested in residential property projects in Kent and the southeast of England and promised returns of 10 per cent a year for three years. Fretwell was sent brochures from the company highlighting its 20 years of experience and “secure returns”.
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She invested £100,000 on November 12, 2020, and a further £60,000 a fortnight later. She was happy with the return on her money, which she reinvested. She invested another £30,000 in July 2021.
But on New Year’s Eve 2021, it started to go wrong. Fretwell and other investors had an email from the company owner saying the firm had to “close the gate” on any withdrawal of funds for three months “to ensure the business remains as strong as possible going into 2022 and beyond”. Interest payments would be “rolled up” rather than distributed.
“It came completely out of the blue,” Fretwell said. “Just weeks earlier I was invited to make further investments and received a cheerful Christmas greetings email with no indication of any problems.”
Weeks later, the company went into administration. Administrators found that the money borrowed from investors was often used to fund overheads rather than going into property projects, and that substantial losses had been funded in this way over a long period. The administrator’s report said that there were many companies involved in the scheme, which were difficult to track because they had not filed accounts for two years.Worried that they had fallen for a sophisticated scam, Fretwell and other investors reported their case to their banks and to the reporting centre Action Fraud, which passed it on to Kent police.Barclays investigated Fretwell’s case and on March 28, 2023, a representative from Barclays’ fraud investigation team contacted her to explain why she would not be refunded. A recording of the conversation was sent to her by Barclays after she made a subject access request. This was shared with The Sunday Times.
After introducing herself as someone working in the fraud investigations team, the Barclays representative said that although Fretwell was invested in a Ponzi scheme, she was not the victim of a scam.
Barclays said it had been “awaiting guidance” about whether the scheme was a Ponzi or scam from UK Finance, a banking industry body. It said investigations by Barclays and UK Finance had concluded the scheme to be a Ponzi.
Barclays said it should have been clearer on its call with Fretwell and should have said that it had decided the case was not an authorised push payment (APP) scam, where people are persuaded to transfer money to a fraudster’s account. Instead its representative just said it was a “scam”. It clarified that a Ponzi is a type of investment scam, and while the mandatory code requires banks to refund victims of APP scams, investment scams do not always qualify.
The bank said: “Before making investments, we encourage everyone to take steps to satisfy themselves that the person or business they are paying is legitimate. If in any doubt we urge they get independent financial advice before transferring any monies.
“In this specific matter, the Financial Ombudsman Service is investigating and it would be inappropriate to comment further until the conclusion of its review.”
Fretwell believes that she is a victim of an APP fraud. Last year, £460 million was lost to APP scams and they have become increasingly sophisticated. Criminals often pose as legitimate businesses or investment firms listed on official records such as Companies House or the register of the Financial Conduct Authority, the City watchdog.
This makes it harder for police, banks and the Financial Ombudsman Service to determine if an investment is a scam (meaning that a victim should be refunded), or simply a bad investment (meaning they should not).
Banks have argued that Ponzi schemes are not always scams, but the ombudsman has found against them on several occasions and ordered victims to be compensated.
Mark Palmos, 63, from East Grinstead, West Sussex, invested about £400,000 in the same scheme as Fretwell via his bank, NatWest, and the building society Nationwide. After filing a complaint through the claims manager Refundee, Nationwide paid him the £65,900 he invested via the building society, but NatWest refused.
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The Payments Systems Regulator, which oversees banks, said it did not exclude Ponzi schemes from its fraud refund rules, but said that for a refund to be eligible, an investment must meet its definition of an APP scam.
Its guidance to banks, which was published in September, said: “In some investment scams [such as Ponzi schemes] consumers are paid a ‘return’ on their investment, when in fact these returns are paid from funds from new ‘investors’. If a consumer has received a return from an investment opportunity, a [bank or building society] shouldn’t conclude that the claim is a civil dispute [and therefore outside of its remit], instead it should consider this information alongside all the other factors to determine if a reimbursable APP scam has taken place.”
UK Finance said its role was to enable its members to come together to discuss complex cases in an appropriate manner. It said it didn’t make recommendations to members as to how they should act on fraud refund claims.
Fretwell has lodged a claim with the ombudsman and is awaiting a decision about whether the Ponzi scheme counts as a scam under the APP fraud refund scheme rules. The administrators are also continuing to investigate.
In a letter to investors, seen by The Sunday Times, Kent police said it had received more than 120 complaints from investors in the same scheme who believed that they had been victims of fraud. However, the police said it would have to drop its investigation because of a lack of resources.
The letter also said: “Investment fraud cases are notoriously difficult to prosecute given the fine line between poor business practices and fraudulent trading.”