Copy trading through influencers: is it really easy money?Social networks are undeniably a phenomenon of our time. People share their lives online, rate others, and compare themselves, sometimes wanting to identify with those who show their wonderful, carefree lives on Facebook, Instagram, YouTube, TikTok, X, etc. to the hundreds of thousands or millions of people who follow them.
We are talking about influencers here. A relatively new word, but one that today represents a new profession, which, thanks to the boom of social networks, has created a new field of activity. A field of activity that has literally become a goldmine for certain influencers. But not just for them: influencers have become an excellent marketing tool for various companies looking to promote their brands and sell their products or services, thereby increasing their profits.
The more well-known an influencer is and the larger the community of people who follow him (“followers”), the greater his credibility and ability to influence their followers’ decisions to buy products or services.
Today, influencers are able to promote virtually any product or service, whether it is clothes, cars, or exotic trips; it is up to them whether or not to accept a partnership with a given advertiser.
So why not promote trading on the financial markets? This is the subject that the Cash Investigation team of the French channel France 2 focused on in the first part of its broadcast on 4 April 2024, entitled: “Easy Money: The False Promises of Influencers”(1)
Mr. Konstantin Mikov, the advocate and founder of the Network Financial Fraud Lawyers, appeared on the broadcast as an expert on the regulation of online brokers and outlined to the audience some of the legal risks for retail investors and practices in the sector: https://www.financial-fraud.lawyer
Easy money through copy trading, but for whom?
Certainly not for an investor.
The Cash Investigation teams investigated the business model of influencers who earned large sums by directly or indirectly promoting or encouraging their followers to invest on online trading platforms in risky financial products through copy trading.
Influencers do not just share their hobbies with the public through their stories or posts, but they also often showcase their luxurious lifestyles that many of their followers, exhausted by daily or financial worries, dream about. Add to this the tempting promises of easy money through trading, and it is hard not to succumb them. Especially if the warning that this is a very risky investment is “mistakenly” omitted by the influencer.
When you follow an influencer for months on end, a certain level of trust and a need to identify with him are established. If he has become rich by copy trading, why shouldn’t I? Moreover, if I can invest a small sum and I do not need to know anything about trading, all I must do is copy and paste the trading signals of an experienced trader and make a profit, mustn’t I?
As the report shows, the illusion of easy money quickly dissipates. The journalists looked at the stories of several consumers who believed the tempting promises of influencers and tried to make their money grow through copy trading. After initial success, they ended up losing their deposits.
“The stories of the investors described in the Cash Investigation report are very familiar to us through the cases of our clients whose interests we defend against Forex brokers. We frequently see clients caught in a vicious circle: rapid gains are followed by equally rapid losses, the investor panics and is manipulated by the broker’s representatives into making new deposits to recover his losses. He ends up losing not only his initial investment, but also other money that he did not intend to invest initially”, said Mr. Konstantin Mikov, Managing Partner at Mikov & Attorneys Law Firm, for the report.
It would be naive to think that influencers promote trading out of pure altruism and admiration for the broker in question. For each investor they bring in, they receive a commission, which, with the large number of newcomers brought in, can reach staggering amounts.
This affiliation is therefore highly beneficial for almost all involved parties: the influencer – the trader (who creates the trading signals), and the broker, except for the investor, who has a very high chance of losing his deposits.
The promotion of copy trading by influencers: is it (im)moral and (il)legal? What are the dangers for consumers?
The Cash Investigation teams confronted several influencers, such as Laurent Billionaire, Marc Blata and Julien Bert, who promoted copy-trading and encouraged their subscribers to invest in the financial markets.
As the Cash Investigation report shows, they were uncomfortable when asked by journalists Élise Lucet and Mathieu Robert about their potential moral and legal liability for such controversial practices they were remunerated for by brokers. Their answers were mostly evasive, or they denied any liability.
In particular, the tense interview between Élise Lucet and Marc Blata, featured in the report, provoked numerous reactions from Internet users, who commented heavily on it on YouTube(2).
The question of the morality of the influencers’ actions must be judged by each of them, and it is up to them to deal with the complaints of aggrieved investors who believed the false promises of these influencers and lost their money. And what about their possible criminal liability? Let’s leave that to the competent authorities.
On the legal aspects of the promotion of copy trading by influencers, the report recalled the new law regulating influencers and their promotion on social networks in France, which, among other things, prohibits the direct or indirect promotion of certain risky financial products and services.(3),(4)
The advocate Konstantin Mikov was interviewed by journalist Mathieu Robert as an expert in the regulation of brokers and European law on the risks facing investors who are encouraged by influencers to trade in the Forex market, CFDs (contracts for difference), or crypto assets through trading platforms.
Konstantin Mikov pointed out that influencers often introduce novice investors to online trading platforms run by companies operating in offshore zones such as the Seychelles, the Cayman Islands, or Bermuda. These platforms then operate outside the framework of European legislation, which serves to protect European consumers of financial products. Mr. Mikov told the audience that the typical modus operandi of these offshore brokers was “market makers”, in other words, a business model in which the broker executes traders’ orders internally and profits from their losses, which naturally creates a conflict of interest.
“We are delighted that the Cash Investigation broadcast has attracted the attention of millions of viewers and sparked a public debate on the dubious, even illegal, practices of influencers who seduce their followers with easy profits through copy trading or trading on the Forex market, or complex and risky financial instruments such as CFDs in general. They have become a veritable marketing tool for brokers, who are thus able to attract thousands of new customers, consumers who would never normally have considered investing on trading platforms. Making novice investors aware of the risks associated with trading on financial markets helps in educating them and can reduce the potentially devastating consequences of losing all their savings through manipulation by unscrupulous brokers.”, concludes advocate Konstantin Mikov.
The Law Firm Mikov & Attorneys, Founder of the Financial Fraud Lawyers Network, has successfully represented a significant number of FX traders from various European countries against most of the well-known brokers on the Forex market.
If you are a victim of financial fraud or have doubts about the circumstances that preceded the loss of your investment, contact us: https://www.financial-fraud.lawyer
Sources:
- https://www.francetvinfo.fr/replay-magazine/france-2/cash-investigation/
- https://www.youtube.com/watch?v=S1Kdu0ZRnr8
- https://www.economie.gouv.fr/daj/lettre-de-la-daj-la-france-devient-le-premier-pays-europeen-se-doter-dun-cadre-juridique-de
- https://www.legifrance.gouv.fr/loda/id/JORFTEXT000047663185/
Disclaimer:
The Financial Fraud Lawyers network aims to inform private investors (traders) of potential malpractices by Forex and CFD brokers. Our mission is to assist and protect traders when they encounter brokerage practices that go against their interests.
Our articles are intended to warn, share and inform the public about the legal risks of Forex and its players. Trading financial products and CFDs as well as investing on online platforms carry legal risks.
The article was written in good faith, based on public information and client testimonials valid at the time of publication. Our articles concern the protection of the interests of individuals on online investment platforms and are published in accordance with our right to inform the public about our activity. This article is not to be considered legal advice.
