Two stars from The Only Way is Essex have been touting a risky investment scheme operating without permission from the authorities, Metro.co.uk can reveal.
The scheme, backed by James ‘Lockie’ Lock and Pete Wicks, invites people to invest a minimum of £450 in a foreign exchange (Forex) fund traded by InvestingBetter, a tiny outfit registered at an address in London.
Customers are told their funds will be traded responsibly using regulated services, but are prompted to send their money to a firm in the Cayman Islands where it is managed at huge risk with no oversight from British regulators.
Mr Lock told a Metro.co.uk reporter posing as a potential customer that he was an investor in the company and made a number of misleading claims about the scheme.
Managing or marketing financial investments of this kind without approval from the Financial Conduct Authority (FCA) is against the law, and risks a fine or imprisonment. The regulator warns that any firm doing so is ‘probably a scam’.
Mr Lock, who has starred in ITV’s ‘scripted reality’ show since 2013, began promoting the service to his 868,000 Instagram followers in early May and set up a separate profile dedicated to marketing it.
Pete Wicks, who is due to appear in this summer’s Celebrity MasterChef series, started advertising the scheme to his 1.2 million followers on Thursday, though he has since deleted the posts.
Posts on Mr Lock’s Instagram page lure people in with claims of ‘insane’ profits for those who have already joined the scheme, of whom he claimed are more than 7000.
People with no investing experience are then helped to set up a Forex trading account and allow InvestingBetter to trade on their behalf for a fee of £20 per month.
The Towie star refused to give Metro.co.uk’s undercover reporter any evidence that the customer reviews and graphs showing past performance were real.
Asked to clarify claims that clients ‘are never risking more than 3-5% of their investments’, he initially said this was a ‘low risk’ and ‘safe’ strategy.
He repeatedly dodged requests to explain how much could be lost through trading, responding with misleading statistics and vague use of financial buzzwords.
Mr Lock stressed that InvestingBetter ‘win around 70% of our trades’ – which, if true, does not necessarily mean clients’ funds will grow, as the losing trades can be significantly larger than winning trades.
He also tried to reassure concerns by claiming ‘we use leverage to limit our losses’. Leverage involves the use of borrowed funds to make bigger bets than the initial investment allows, and can increase trading risk dramatically.
After being quizzed at length he eventually admitted up to 5 per cent of an account can be traded per day. This means up to a third of the fund can be lost in just a week, or nearly 70 per cent over the course of a month.
InvestingBetter repeatedly tells customers they keep ‘total control of their funds’ and have final responsibility for any trades placed on their accounts, which are held at a third-party broker called Vantage FX.
Mr Lock also told Metro.co.uk’s undercover reporter ‘we only work with fully regulated companies’.
But the link he provided directed to a company in the Cayman Islands that shares the Vantage brand with British and Australian sister companies.
The company is regulated by the Cayman Islands Monetary Authority, not the FCA, meaning UK investors have little protection and may have no way to get their money back if anything goes wrong.
The legal limit on leverage in the Caymans is more than 16 times higher than in the UK, allowing InvestingBetter to trade with much higher risk than if they used an FCA-backed broker.
While clients are free to request their money back from Vantage FX, they are required to hand over their trading login details to InvestingBetter to benefit from the trading.
Mr Lock asks customers to sign up via a personalised link, suggesting he receives a commission for every new customer.
The TOWIE star frequently appeared in promotional videos with Charlie Cousins, who claimed to be the owner and founder of InvestingBetter on social media.
According to official filings the company is in fact co-owned and directed by Panteleimon Kokkalis, a 54-year-old IT manager, and Morgan Morse, a 21-year-old economics student at the University of Kent.
Mr Lock, Mr Wicks and InvestingBetter all declined to comment.
After being contacted by Metro.co.uk, Mr Lock deleted some posts from his @jameslockfx Instagram page and removed a link to the page from his main account.
Mr Wicks deleted an advert for the scheme from his page, while Mr Cousins removed some material from his @charlesfxtrades account as well as any reference to himself as owner or founder of InvestingBetter.
The automatic forex trading service is a form of ‘copy trading’, which is classed as investment management and requires authorisation from the FCA.
Selling forex ‘signals’ for people to apply manually is generally classed as specific investment advice which also requires FCA approval.
Instagram has seen an explosion of flashy forex traders flogging signals and copy-trading schemes as pictures of them posing with sports cars and luxury gear give an illusion of trading success.
In January, Metro.co.uk exposed a copy-trading scheme run by 20-year-old student Gurvin Singh, who is believed to have lost almost £4 million trusted to him by mainly young investors attracted by his media coverage.
Companies approved by the FCA are required to show a thorough understanding of rules designed to keep customers’ money safe and to submit regular reports to the authorities.