Several social media stars have appeared in court after being charged by the City watchdog with allegedly being paid to promote an unauthorised foreign exchange trading scheme.
It is the latest crackdown by the Financial Conduct Authority (FCA) on the rising trend of ‘finfluencers.’
In May, the FCA announced that it has charged Emmanuel Nwanze with running an unauthorised investment scheme and issuing unauthorised financial promotions.
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The City watchdog, which has previously warned about the risks of providing investment advice on social media, claims Nwanze and Holly Thompson used an Instagram account called @holly_fxtrends to provide advice on buying and selling contracts for difference (CFDs) when they were not authorised to do so.
In a landmark move, the financial regulator has also charged several social media stars who it claims were paid to promote the scheme.
It includes stars of popular TV shows among young people such as The Only Way is Essex and Love Island.
What are the FCA charges about?
The FCA has alleged that between 19 May 2018 and 13 April 2021, Nwanze and Thompson used Instagram to provide advice on buying and selling CFDs, a high-risk investment product used to bet on the price of an asset, in this case the price of foreign currencies.
Trading platforms have strict rules on assessing customers suitability when promoting CFDs.
The financial regulator also alleges that Nwanze paid reality TV stars and social media personalities Biggs Chris, Jamie Clayton, Lauren Goodger, Rebecca Gormley, Yazmin Oukhellou, Scott Timlin and Eva Zapico to promote the @holly_fxtrends Instagram account to their millions of followers.
They have appeared on popular shows such as Love Island and The Only Way Is Essex and regularly post content to millions of young followers, and with a combined following of 4.5 million, the FCA fears this could encourage people to invest in products they don’t understand.
Each of the social media stars faces one count of issuing unauthorised communications of financial promotions.
The defendants appeared at Westminster Magistrates' Court on 13 June 2024.
Geordie Shore star Timlin pleaded not guilty, as did Nwanze and Thompson.
The Only Way Is Essex's Goodger as well as Oukhellou and Zapico didn't give an indication of a plea.
Other defendants including Chris, Clayton and Gormley from Love Island have had their cases adjourned until 3 July.
A trial preparation hearing will be held on 11 July at Southwark Crown Court and all defendants have been granted unconditional bail until then.
“Too many people blindly trust anything they see on social media, but throw in a well-known celeb or a reality TV star endorsing a product and people are even more likely to trust a post,” says Laura Suter, director of personal finance at AJ Bell.
“This isn’t a huge problem if you buy some dodgy beauty products or sign up to a duff subscription, but if you put your life savings into an investment because someone from the TV said they made impressive returns, that could be life changing.
Suter suggested the FCA is now ramping up its campaign to keep finfluencers in line amid a rise in social media scams.
“This high-profile case no doubt intended to send a message to other influencers,” she adds.
“With a maximum penalty of up to two years in prison and an unlimited fine for breaking the rules, there’s no doubt it will make people sit up and listen.”
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