Consumer protectionAdvertising for dubious financial investments on social media

Currently, the market watchdogs for financial markets at the consumer association Hesse receive numerous complaints via the early warning network about questionable investment offers on social media. According to this, companies would contact particularly young users on Facebook, Instagram and messenger services in order to attract them for dubious financial investments.

These are the details:

  • Made-up individuals – acting on behalf of companies – try to build relationships with potential clients through lifestyle groups, personal messages, friend requests or likes on social media.

  • They advertise dream holidays or a luxurious lifestyle. In order to obtain the necessary money, potential clients should in turn recruit new members. However, this embodies the logic of a pyramid scheme.

  • There are no concrete information on alleged investment opportunities to receive a so-called passive income or reductions in membership fees. Also, it remains unclear how exactly profits and returns are to be generated.

Wolf Brandes, watchdog team leader for gray capital markets at the consumer association Hesse, commented: "We observe a trend towards promoting and distributing products within the gray capital market via social media channels. This marketing has a new quality. Unlike, for example, advertising on a corporate website, identification figures are created to get in touch directly with consumers. Suppliers are targeting younger consumers in a more personal environment through alleged personal success stories."

Source: Consumer association Hesse

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