FCA bans Cypriot firms that used unauthorised celebrity endorsements in a bitcoin scam

The UK’s tops financial markets watchdog has come down hard on four Cypriot investment firms for using unauthorised celebrity endorsements on social media in a scam estimated to have cost British investors hundreds of thousands of pounds.

The four companies – Hoch Capital, which was trading as iTrader and tradeATF; Magnum FX, which was trading as ET Finance; Rodeler was trading as 24option; and F1Markets was trading as Investous, StrattonMarkets and Europrime – used social media and webpages carrying fake endorsements from celebrities to entice consumers into the scams involving high risk contracts for difference, the Financial Conduct Authority (FCA) alleges.

Contracts for differences are complex financial investments which allow traders to speculate on the movement in prices of underlying assets and can cause heavy losses to unwary or inexperienced investors.

The regulator has now banned the four companies from trading in the UK, preventing them from utilising their passporting rights under EU law. The regulator said it’s the first time it has had to use this measure.

The FCA orders require the companies to stop selling contracts for difference to UK customers, to close existing positions with UK customers, to return UK customers’ money and to notify UK customers of the FCA’s action.

The firms are entitled to seek a review of the FCA’s action.

None of the firms and their operators have any actual presence in the UK and the firms have addresses in Cyprus.

The regulator said it had taken action because consumers were not provided with sufficient information as to the nature of the investments, some were pressured into making increasingly large investments in contracts for difference, which referenced bitcoin, foreign exchange, shares and indices, and some were even encouraged to take out credit to make the payments.

It also appears that the firms had failed to pay money owed to investors, charged customers undisclosed fees and failed to tell them about the risks of trading contracts for differences.

“The FCA has removed passporting rights for these firms which effectively stops them from continuing to provide these types of products in the UK,” said Mark Steward, executive director of enforcement and market oversight. “We welcome the further action taken by the CySEC. The FCA’s investigations into the sector are continuing.”

Following the FCA’s action, and on the basis of information supplied by the FCA, the Cyprus Securities and Exchange Commission (CySEC) has fully suspended the regulatory authorisations of Rodeler and Hoch Capital and partially suspended the regulatory authorisations of Magnum FX and F1 Markets.

The CySEC action means that Rodeler and Hoch Capital must cease all regulated activities entirely. Magnum FX and F1 Markets may only provide investment services to their existing non-UK-resident clients, and must not promote the provision of their investment services or take on new clients. They are also explicitly prohibited from providing investment services to existing or new UK resident clients.

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