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Financial Services Law Insights and Observations

FTC settles with online stock trading site

Federal Issues FTC Enforcement Consumer Finance FTC Act Covid-19

Federal Issues

On March 8, the FTC announced a proposed settlement with an online stock trading site and its operators (collectively, “defendants”) for allegedly using earnings claims to mislead consumers into signing up for services, which led them into long-term subscription plans. The FTC filed a complaint in 2020 as part of an initiative called “Operation Income Illusion,” which encompasses more than 50 enforcement actions against alleged scams targeting consumers with false promises of income and financial independence (covered by InfoBytes here). According to the complaint, the defendants allegedly violated the FTC Act, among other laws, by falsely marketing investment-related services by claiming that “consumers who purchase [the defendants'] services will earn or are likely to earn substantial income.” Additionally, according to the press release, the defendants featured testimonials from purported customers claiming they made “[$]6500.00 in 20 minutes” and “$500 in 15 min[utes],” and allegedly attempted to profit off the Covid-19 pandemic, with a “guru” claiming that he could “rack up nearly $500K in profits by trading stocks related to the COVID-19 pandemic.” Under the terms of the stipulated final order, the defendants, among other requirements: (i) must pay a fine of over $2.4 million to the FTC: (ii) are prohibited from making claims regarding potential earnings without having written evidence that those claims are typical for consumers; and (iii) are prohibited from making claims misrepresenting that purchasers can be successful in trading regardless of their experience, the amount of capital they have to invest, or the amount of time they spend trading.

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