Belgium’s Financial Services and Markets Authority (FSMA) issued a warning on Monday against companies selling, trading, and training products related to forex, contract for differences (CFDs), and cryptocurrencies using so-called multi-level marketing (MLM) structures.
The regulator specified that the “sale of such trading and training software mostly takes place via a pyramid structure. The term generally used for this technique is ‘MLM’ (multi-level marketing), in which consumers are given incentives to bring in new members. In exchange for doing so, they receive compensation in the form of a commission or discount on the price of the software package or subscription price.”
FSMA noted that it “has observed that such MLM networks are very active on social media via numerous (private) groups whose only purpose is to promote a particular MLM and to recruit new members. It is worth noting that these schemes mainly target a young audience, who are very active on social media, where all sorts of photos circulate showing young people seemingly swimming in riches. The message is that everyone can afford this kind of lifestyle if they bring in enough new members and make the right investment in the software being promoted.”
The regulator also warned that offers of CFDs and forex via the internet are very risky and vulnerable to fraud: anyone who invests in CFDs or forex runs the risk of losing all the money invested. The possibility of loss is much higher than the possibility of gain: surveys by other European supervisors conducted among investors show that as much as 75% to 89% of investments in derivative products, such as forex products, are loss-making.