Four Cyprus-based investment firms which charged undisclosed fees and lost their customers hundreds of thousands of pounds have been barred from operating in the UK.
In the first case of its kind the Financial Conduct Authority removed the passporting rights of the firms after an investigation found UK investors were being offered high risk contracts for difference (CFDs) using fake celebrity endorsements on social media.
The regulator has ordered 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, to return the money of its UK customers.
CFDs are financial investments which allow traders to speculate on the movement in prices of underlying assets, but the FCA warned the process was complex and could cause "heavy losses to unwary or inexperienced investors".
The FCA said the companies used social media to entice consumers into scams involving CFDs and in some cases customers were encouraged to take out credit to make payments and pressured into making increasingly large investments.
But in return the firms allegedly failed to pay money owed to investors and charged customers undisclosed fees whilst failing to disclose the risks of trading CFDs.
The FCA said it knew of a number of customers who lost more than £100,000 each to the schemes, which referenced bitcoin, foreign exchange, shares and indices.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: "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."
The four firms are entitled to seek a review of the FCA’s action but their own regulator, the Cyprus Securities and Exchange Commission, has fully suspended the authorisations of Rodeler Ltd and Hoch Capital Ltd and partially suspended those of Magnum FX (Cyprus) Ltd and F1 Markets Ltd.
The City watchdog has increasingly warned of "get rich quick" investments advertised via social media which use fake celebrity endorsements to convince customers to hand over funds.
rachel.mortimer@ft.com
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