Investment firms that used unauthorised celebrity endorsements banned by UK regulator
Scam artists using fake news stories featuring celebrities is part of a wider trend.
2nd June 2020 10:51
by Kyle Caldwell from interactive investor
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Scam artists using fake news stories featuring celebrities is part of a wider trend.
The Financial Conduct Authority (FCA) has stepped in to ban four Cypriot investment firms that used unauthorised celebrity endorsements to promote scam investments involving contracts for difference (CFDs).
The FCA estimates that UK investors have lost hundreds of thousands of pounds in these investments, with some losing more than £100,000 each to the schemes. The celebrities were not named.
The firms that have been banned are: Hoch Capital Ltd (trading as iTrader and tradeATF), Magnum FX (Cyprus) Ltd (trading as ET Finance), Rodeler Ltd (trading as 24option) and F1Markets Ltd (trading as Investous, StrattonMarkets and Europrime).
None of the firms or their operators have any actual presence in the UK. Instead, the firms have addresses in Cyprus.
The FCA took action because consumers were not provided with sufficient information as to the nature of the investments and some were pressured into making increasingly large investments in CFDs, which referenced bitcoin, foreign exchange, shares and indices. In addition, some investors were encouraged to take out credit to make the payments.
CFDs are complex financial investments which allow traders to speculate on movements in the prices of underlying assets without having to physically own the product. They are very risky, and can cause heavy losses to unwary or inexperienced investors.
The Cypriot-regulated firms, which were permitted to operate in the UK through a method known as passporting, must now cease all regulated activities with UK consumers. It is the first time the FCA has used its power to remove passporting rights from a firm.
Mark Steward, executive director of enforcement and market oversight at the FCA, notes: “The FCA has removed passporting rights for these firms, which effectively stops them from continuing to provide these types of products in the UK. We welcome the further action taken by the CySEC. The FCA’s investigations into the sector are continuing.”
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Last August it was reported that other scam artists were using fake news stories featuring celebrities such as Holly Willoughby on social media, to trick unsuspecting people into signing up to “get rich quick” investment schemes.
This is part of a wider trend. Action Fraud, the national fraud and cyber-crime reporting centre, last year warned of a rise in fraudulent investment schemes on Instagram, which have cost users over £3 million.
The people most at risk are young people aged between 20 and 30 as they are the biggest users of social media.
This article was originally published in our sister magazine Money Observer, which ceased publication in August 2020.
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