Ferdinand wanted to make some extra income. He found traders online who said they would professionally manage investments in cryptocurrency and other markets for him. The traders guaranteed high profits, so Ferdinand agreed to invest with two of them.
Both traders told Ferdinand he needed to fund his investments with bitcoin. The first trader told Ferdinand to purchase bitcoin and transfer it to their company’s cryptocurrency wallet. The second trader told Ferdinand they needed to synchronise his accounts, so asked for his wallet login details.
Within a week, Ferdinand could see what appeared to be significant returns in his account with the first trader. He then agreed to invest more money. In total, Ferdinand used his credit card to buy bitcoin on three occasions. The total amount he spent was $13,300.
A few days later, Ferdinand told the first trader he needed to withdraw part of his investment. The trader said Ferdinand must pay cryptocurrency taxes totalling nearly $3,000 for any withdrawal. Ferdinand said he couldn’t pay, and that he thought the trader was scamming him. He didn’t hear from the trader again.
After the problems withdrawing money from the first trader, Ferdinand requested a refund of his deposit from the second trader. Despite Ferdinand sending several messages, the second trader didn’t respond.
Ferdinand complained to his card provider. He asked them to reimburse him for the bitcoin purchases on the grounds of misrepresentation, and because he hadn’t received the goods he paid for. He also suggested the card provider should have done more to protect him from fraud, particularly because of the amount and frequency of the transactions.
There was no doubt Ferdinand had been scammed by the two traders – but this didn’t automatically mean his card provider had to refund him.
We found Ferdinand had authorised the transactions he was complaining about, so any protections for unauthorised card transactions didn’t apply.
We then considered whether there were grounds for a chargeback. This a process where a credit card transaction can be refunded because of a problem with the goods or services purchased. There are limited grounds for a chargeback. The process can only be used to resolve some disputes between a cardholder and the merchant they purchased goods or services from, for example if the merchant doesn’t send the goods, or the goods are not as described.
We found there weren’t valid grounds for a chargeback because Ferdinand received the bitcoin he paid for. This meant he couldn’t argue the goods weren’t received or that the merchant had misrepresented anything. Ferdinand’s real complaint was about what happened to the bitcoin after he transferred it and disclosed his login details. That wasn’t grounds for a chargeback.
The final issue we considered was Ferdinand’s suggestion his card provider should have done more to protect him. Although the transactions were for relatively significant amounts, we didn’t think three transactions over eleven days was suspicious. We also found there wasn’t anything else to put the card provider on notice of the fraud, particularly because Ferdinand had purchased bitcoin from legitimate merchants.
Because we found the card provider hadn’t done anything wrong, we issued a final decision that Ferdinand should discontinue his complaint.
Insight for consumers
The circumstances in which consumers can recover funds spent on a credit card are limited. Consumers shouldn’t rely on being able to get a refund in place of carefully considering the trustworthiness of who they deal with online.
Consumers should also be careful when transferring or giving someone else access to bitcoin, because these transactions can’t be reversed.
Consumers should also be alert to the possibility of scams. It is a fairly common scam method to tempt someone to invest more money after initially providing a good return. When the consumer invests more money, the fraudster then disappears taking the money with them.