The companies selling, trading, and training crypto-related products have received a warning from the Financial Services and Markets Authority (FSMA) of Belgium on September 21.
Multi-Level Marketing Structure For selling Products
The warning released by the market regulator indicated that the companies have been using the multi-level marketing (MLM) structure for selling the products.
Notably, a multi-level marketing structure is an approach where the existing customers of the company brought-in more users and for that, the company offers incentives to them.
FSMA, in its warning, has noted that offering CFDs and forex through the internet would be risky for the companies, as it could easily be vulnerable to fraud.
Further, it has been stated that the probability of earning a profit in this kind of sale is very low compared to the probability of loss.
FSMA also released a survey, which has been prepared by the European supervisors, mentioning that 75 to 89 percent of derivative products investment have experienced losses.
FSMA List Of Flagged Platforms
As per the report, most of the social media influencer promote this scheme by flaunting their lifestyle and explaining to people how the products helped them in getting rich.
It is to be noted that the main target of these schemes is the youth of any of the nations.
The regulator has further stated, “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 influencers, who bragged about forex and other tradings on their social media platform, are now experiencing problems in operating it. As of now, the European regulators are actively flagging their accounts.
However, the FSMA did not call all the schemes fraud, directly, it just indicated that there are many cases of fraud that use those instruments.
In the meantime, FSMA is preparing a list of the flagged platforms, which according to it are a bit suspicious.