Following an application by the FCA, the High Court, on 14 May 2019, declared that Xcore Capital Limited (Xcore) and Jonathan Chitty had carried on an unauthorised investment scheme. The scheme took in at least £1 million from investors but only a small amount of the investors’ money was ever used for trading.

Consumers gave money to Xcore in return for a 6% annual return. They were led to believe that Xcore would be trading their money on forex and equity markets. Instead, however, the majority of the money was used to fund an office in Mayfair, brokers' wages and Chitty's lifestyle. The Financial Conduct Authority (FCA) said Chitty's personal spending included £102,000 on cryptocurrencies, £24,000 on a Rolex, £20,000 on his wedding and a further £58,000 on luxury goods.

The court found Xcore ran a deposit-taking scheme without the necessary authorisation from the FCA and that Chitty was knowingly concerned in the scheme. It further requires Xcore and Mr Chitty to pay the FCA £917,231 which is the full value of all outstanding sums owed to consumers. The FCA will distribute to consumers any funds it is able to recover from Xcore and Mr Chitty.

On 20 November 2018, following an application by the FCA, a Judge in the High Court had previously imposed a freezing order on Xcore and Jonathan Chitty’s assets, and ordered to stop selling investments regulated by the FCA. This order remains in place until further order of the Court.

The Financial Conduct Authority (FCA) and Action Fraud are warning the public to be wary of investment scams carried out via bogus online trading platforms. This warning comes as cryptoassests (crypto) and forex investment scams reports more than tripled last year to over 1,800. Fraudsters promise high returns from investments in crypto and forex, with victims losing over £27 million in total in 2018-19.

Fraudsters often use social media to promote their “get rich quick” online trading platforms. Posts often use fake celebrity endorsements and images of luxury items like expensive watches and cars. These then link to professional-looking websites where consumers are persuaded to invest.

Investors will often be led to believe that their first investment has successfully made a profit. The fraudster will then contact the victim to invest more money or introduce friends and family with the false promise of greater profits. However, eventually the returns stop, the customer account is closed and the scammer disappears with no further contact.

Action Fraud reports show that on average, victims were each scammed out of £14,600 from forex and crypto scams in 2018-19.

As part of the FCA’s ScamSmart campaign the FCA will be running advertising to raise awareness of online trading scams. Running on social media, the ScamSmart adverts aim to make consumers more sceptical of “get rich quick” trading scams promoted online.

Director of Action Fraud, Pauline Smith, said:

“These figures are startling and provide a stark warning that people need to be wary of fake investments on online trading platforms. It’s vital that people carry out the necessary checks to ensure that an investment they’re considering is legitimate.

“Action Fraud is pleased to be partnering with the FCA to raise awareness of online trading scams, and we hope it will help prevent more people falling victim. Remember, if you think you have been a victim, contact Action Fraud.”

A settlement has been reached with the Banc De Binary Ltd for possible violations of The Investment Services and Activities and Regulated Markets Law of 2007.

More specifically, the settlement reached relates to the assessment of the Company’s compliance, at the time it was authorised, with its CIF authorisation, compliance with the conditions under which an authorisation was granted, relating to the change in CIF information and details. 

Also, the firm didn't comply with the conduct of business obligations when providing investment and ancillary services to clients, the obligation to execute orders on terms most favorable to the client as well as the obligation to ensure the correctness, completeness and accuracy of the information submitted to CySEC.

The settlement reached with the Company, for the possible violations, is for the amount of €300.000. The Company has paid the amount of €300.000.

The Cyprus Securities and Exchange Commission, better known as CySEC, is the financial regulatory agency of Cyprus. It supervises and controls the operation of the Cyprus Stock Exchange, grants operation licenses to investment firms, including investment consultants, brokerage firms, and brokers, impose administrative sanctions and disciplinary penalties. You can read the detailed article about the Cyprus Securities and Exchange Commission here.

ASIC has released a consultation paper Product intervention: OTC binary options and CFDs on proposals to use its product intervention power to address significant detriment to retail clients resulting from over-the-counter (OTC) binary options and CFDs.

The Australian market for binary options and CFDs is growing rapidly, with the number of clients more than doubling in the past two years to one million clients (99% are retail clients and the majority are based offshore). Licensed issuers of these products conducted 675 million trades with clients last year and earlier this year held $2.9 billion of client money for trading.

ASIC is concerned that retail investors have suffered, and are likely in the future to suffer, significant detriment from binary options and CFDs.

A review conducted by ASIC in 2017 found that: 80% of clients who trade binary options lose money; 72% of clients who trade CFDs lose money, and 63% of clients who trade CFD over currency pairs lose money.

ASIC Commissioner Cathie Armour said, "For many years ASIC has taken strong action to protect consumers of binary options and CFDs, using the range of regulatory tools available to us. However, we are concerned that consumers continue to suffer significant harm from trading these products.

"A complete ban would prevent retail clients from losing money trading binary options. We believe binary options provide no meaningful investment or economic use and have product characteristics similar to gambling products," Commissioner Armour said.

ASIC seeks the feedback on its proposed product intervention orders by 1 October 2019.