Ban for traders that used fake endorsements from Bear Grylls to entice investors into huge losses

The City Watchdog has banned four Cyprus-based firms from targeting British investors, after they lured savers into high-risk trading strategies using bogus endorsements from celebrities including Sir Richard Branson and survivalist Bear Grylls.

A number of savers lost six-figure sums through the sites, which had sponsorship ties to football clubs and sports stars including Manchester City and Ultimate Fighting Champion champion Conor McGreogor.

The sites used unauthorised endorsements of complex investments via social media to induce people into buying and selling “contacts for difference”, or CFDs, which allow traders to speculate on the movement in prices of assets with the prospect of fast returns, but more often than not lose money.

Similar firms have previously lured investors via fake news articles boasting of endorsement from stars such as Deborah Meaden from BBC’s Dragons’ Den.

Such investments are so high risk that providers are legally obliged to inform customers what percentage of trades typically lose investors money. On eToro, for example, a legitimate provider of CFDs, 75pc of investor accounts lose money when making the high-risk trades. 

The regulator, the Financial Conduct Authority, has now clamped down on four firms following numerous reports of bad behaviour, including iTrader, also known as Hoch Capital, which signed a partnership deal with Manchester City Football Club in 2016 in a joint marketing campaign. At the time the club said the firm’s “integrity” made it the perfect partner and that it operated under the strictest rules. 

The other firms banned included Magnum FX, F1 Markets and Rodeler, also known as 24option, which signed a sponsorship deal with Ultimate Fighting Championship star Conor McGregor, also in 2016. The firm also signed a two-year sponsorship deal with Italian football club Juventus in 2014.

Italy’s financial regulator had already banned Hoch Capital and Rodeler prior to the FCA’s intervention.

The firms – all based in Cyprus – were previously allowed to operate in Britain through a method known as “passporting”, which allows companies regulated in another country within the European Economic Area to operate anywhere else in the region. 

This is the first time the FCA has used its power to remove passporting rights from any firm. 

It said consumers were not provided with sufficient information of the investments they were being encouraged to buy and trade. Some savers were pressured into making increasingly large investments purporting to relate to the digital currency Bitcoin, foreign exchange rates and stock markets. In some instances the firms encouraged unwitting customers to take out loans or use credit cards to make the payments. 

Testimony from victims also revealed the firms had failed to pay money owed to savers, charged customers undisclosed fees and failed to tell them about the risks of trading.

A number of customers lost more than £100,000 each to the schemes, the FCA said. 

The Cyprus Securities and Exchange Commission, the country’s financial regulator, has now also suspended Rodeler and Hoch Capital’s right to operate in Cyprus and has partially suspended the permissions of the other two firms. 

A spokesman for Sir Richard welcomed the FCA’s actions, but said more needed to protect investors online. “These firms are constantly adapting and renaming themselves to avoid regulations. It is really concerning that people may get tricked into parting with their money by someone pretending to be Richard Branson or other well known people,” he said.

In January the Virgin boss helped to launch an educational campaign to help people to spot scams, after repeated attempts from scammers and rogue firms to use his name to promote several dubious get-rich-quick schemes.

Mr Grylls was approached for comment.  

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