The watchdogs of financial markets from the German consumer association in Hesse observe an increasing number of consumer complaints on obscure business models online. Together with the watchdogs for the digital world, the watchdogs of financial markets constitute an important instrument of consumer policy. For this, information from consumer consultations in the 16 national consumer advice centers serves as a database for monitoring and as an early warning system for submarkets. The current warning includes the following aspects:
- The watchdogs warn against fraudulent offers that are presented online as simple and profitable financial investments. In the early warning system there were many consumer notifications pointing towards illegal pyramid schemes.
- As seemingly lucrative investments, pyramid schemes require consumers to make a payment in advance – allegedly as a processing fee or to increase revenue opportunities. A key characteristic is that consumers are betrayed the promised revenue, since the system crashes prematurely due to too few participants.
- Many complaints address offers of alleged crowd-funding providers such as Crowdfunding International (CFI), WoWiCro or Kairos Technologies that are promoted on YouTube.
Wolf Brandes, head of watchdogs of financial markets at the consumer association Hesse, noted: “These offers are no real financial investments. From a consumer’s point of view, the advertised system, however, does appear as a profitable investment, since returns are many times higher than the invested sum. Especially its profound advertisement and wide circulation on the web and through social media is what poses a risk in our view. This is why we consider to take legal steps against conspicuous providers."
Source: Watchdogs of financial markets