Outrageous misrepresentation in football sponsorship a danger to the FX industry and must be stopped
Unregulated binary options firms with no registered physical address and a litany of less than flattering diatribe adorning internet forums, as well as misleading company names are still being accepted as major sponsors for prominent British football teams. Until this is stopped, it is a danger to our esteemed industry, perpetrated by complete outsiders
There is an unwritten and relatively widely understood practice which has dogged the genuine and reputable electronic trading industry for quite some time now, that being that the established large retail FX firms of London, New York and Sydney as well as their institutional compatriots that provide aggregated Tier 1 liquidity via equally well established liquidity management firms quite simply do not need to engage in vast and expensive mass market offline advertising campaigns, nor do they need to buy the media so that they say nice things about them, as their pedigree is well earned and stands itself out.
On the other hand, nefarious binary options companies, which do not belong in the same category as any entity in the electronic trading industry, their roots being in lead buying (or stealing), affiliate marketing, gambling or other forms of vice, and whose leaders have educational and career backgrounds that represent a complete dichotomy when compared to those who lead the genuine electronic trading firms, having gained their knowledge via internships at major institutions before becoming skilled professionals within either eFX divisions of large banks or institutional liquidity providers before becoming senior executives of publicly listed firms on reputable stock exchanges, are polar opposites.
Ordinarily, the lowbrow binary options business would have from its very origin have been castigated by most due to its absolutely fraudulent nature, which has now attracted the attention of regulators globally, as well as national governments, many of which have banned it completely from being peddled on their shores, and rightly so.
The problem that has arisen is that these companies have so little substance that they need to buy the media as well as buy the confidence of an unsuspecting retail audience, hence massive marketing budgets compared to the smaller marketing budgets of established and proper firms, in order that the media says nice things about them and aligns them with the bona fide firms, and vast offline campaigns that involve in many cases associating themselves with brands that have extremely loyal fans, such as Premier League football teams.
Back in September, FinanceFeeds succeeded in lobbying British football team Southampton FC in an attempt to ensure that it canceled its sponsorship deal with Banc de Binary, in which it was pointed out that associating such a firm with a highly trusted football team would be disastrous for the followers of Southampton FC.
Unfortunately, however, the practice has continued to manifest itself, this time with West Bromwich Albion, a British football team based in the Midlands, having signed a sponsorship deal with IGOFX, which clearly demonstrates that yet again, very little due diligence was conducted by the sports sponsorship agency that brokered the deal between IGOFX and West Bromwich Albion.
Where do we start?
First of all, IGOFX, despite its misleading name, is not an FX company at all but actually a binary options brand that simply operates a sales floor and takes its full solution from a binary options market maker.
The firm is registered in Vanuatu, which is a region which has become relatively popular recently with companies attempting to circumvent regulation, or which do not want to have to adhere to right and proper regulatory stipulations in recognized electronic trading jurisdictions.
Rather than falling into the category of electronic trading, IGOFX is more of a multi-level marketing (MLM) scheme, with many sites in that sector making reference to it.
The domain, igofx.com was registered on August 13, 2012, and there is absolutely no record of the firm’s physical location. Quality companies that are supposed to be custodians of customer funds and provide genuine financial products to a retail audience that do not provide their full commercial details are as rare as rocking horse dung. It is as simple as that.
The IGOFX Compensation Plan
According to many sources in the multi level marketing sector, IGOFX affiliates invest $100 or more on the promise of a passive monthly ROI of between 10% and 30%. IGOFX affiliates earn a 5% referral commission on funds invested by personally recruited affiliates.
IGOFX take 10% of monthly ROI payments to affiliates and use them to pay residual commissions. These residual commissions are paid out via a unilevel compensation structure. A unilevel compensation structure places an affiliate at the top of a unilevel team, with every personally recruited affiliate placed directly under them (level 1).
If any level 1 affiliates recruit new affiliates, they are placed on level 2 of the original affiliate’s unilevel team.
If any level 2 affiliates recruit new affiliates, they are placed on level 3 and so on and so forth down a theoretical infinite number of levels.
IGOFX cap payable unilevel levels at four, with commissions paid out as a percentage of monthly ROIs earned by unilevel team affiliates:
level 1 (personally recruited affiliates) – 5%
level 2 – 3%
levels 3 and 4 – 1%
Note that residual commissions are not paid out to IGOFX affiliates who have not recruited at least three affiliates who have invested.
In addition to passive ROI payments, IGOFX affiliates can also “mirror” trades fed to them by the company. This is achieved through third-party MT4 trading software, with performance varying from month to month.
This is an absolute danger to our industry, and the most difficult aspect here is that because there is no regulator overseeing the conduct of this firm, there is no means of censuring it or monitoring its conduct, thus not much can be done unless it becomes a police matter, which is highly unlikely unless there is genuine discourse from customers that can prove any wrongdoing, which is nigh on impossible.
Therefore, companies such as this continue to advertise on mainstream, widely trusted strips such as West Bromwich Albion, whose fans, rather like those of Southampton FC, and Juventus which has still got 24Option sponsorship prominently placed on its shirts, and as FinanceFeeds pointed out during the past few days, has been able to display such advertisements on French websites despite the ban on binary options adverts.
Whereas 24option and French football club Olympique Lyonnais have terminated their partnership amid a wider wave of such partnerships brought to an end in France, the deal with Juventus FC is on and is freely promoted across the web, a prominent example being 24option’s French website displaying a banner of the partnership between the binary options brand and Juventus FC.
It is exactly this type of high profile advertising of binary options firms that has led to the banning of OTC derivatives advertising in many nations and is potentially damaging to the entire right and proper industry, the damage being created by pretenders rather than genuine participants, hence it is toxic to the core and should be of great concern to our valuable industry.
On June 29 last, 24Option extended its sponsorship of Juventus for another year. This shows the absolute rise to wealth of these marketing-led brands.
FinanceFeeds reached a few organizations in London that spend significant time in masterminding sponsorship bargains for football groups, all of which clarified that it would be consummately adequate for them to acknowledge such companies as supporters, until we clarified the genuine size and potential results of advancing such firms and their exercises toward the reliable aficionados of football groups.
London’s West End is a major center for PR agencies and media entities that specialize in putting together branding and sponsorship deals. We ask where the due diligence is, and of course it does not exist.
Great Portland Street has for many years been home to a plethora of specialist agencies, some very large, that work with blue chip firms and broker branding an sponsorship deals with large sports teams as well as other high profile visuals such as television and entertainment.
To find out whether such firms consider sport sponsorship by binary options brands ethical, FinanceFeeds approached Synergy, which nestles deep in the heart of London’s trendy media heartlands in Great Portland Street. When asked whether they would take a binary options brand and broker a deal with a football club, and whether they consider this unethical, the representative explained “No, we work with any firm that looks to improve their branding.”
“We work exclusively brand side” she continued to explain. “One of our services is consultancy, in which we have a look at the portfolio of the brand, and then we look at the sponsors that may suit. We work for big blue chip clients often on this basis.”
“We don’t think it is unethical to broker deals between football teams and binary brands” she said. “If it is right for the brand or rights holder, then we go ahead. We look at he brand, value, ROI, it’s not an easy yes or no.”
We believe that the agencies see the dollar signs and do the deal, not realizing the true business models that these firms employ, therefore some degree of providing information to marketing and PR agencies is also needed in order to stem this level of high profile sponsorship.
An additional caveat to bear in mind is that football shirts, and what is written on them, are massively influential to children and teenagers in parts of the world in which football is a very popular and almost religiously followed sport. Football clubs often sell merchandise versions of the shirts of the stars that children and teenagers who love football admire, therefore by having binary options names on football shirts, minors by default could be inadvertently standing themselves up as ‘ambassadors’ to this fraud, or even worse getting taken in by it themselves.
The internet is awash with a litany of appalling experiences from customers and former staff of such firms, thus it would be very easy for a sports sponsorship agency to conduct some degree of due diligence, even if they are unfamiliar with the online trading industry.
Football clubs are followed religiously by their loyal and devoted fans, and thus not only would any advertiser be trusted by its fans, hence they may be tempted to deposit funds to such a firm, meaning that by proxy, the beloved football club of thousands of fans would be an accessory to them losing their money to a binary options scam, as well as them being ambassadors to it by wearing the club’s merchandise.
This extremely powerful marketing trick alludes to the gaming and affiliate marketing background that most of these firms have their roots in. In some cases, they do a deal in which the customer database becomes available to both parties, which is very much a cause for concern.
Until the police – Britain’s City of London Police recently stated that binary options is the “fastest-growing iteration of investment fraud” and has a vast amount of data that could put a stop to this particular case, as West Bromwich Albion is a British corporate enterprise, hence the British police force could have this put a stop to as regulatory oversight does not apply, and until such action is taken, it remains a grave concern.
FinanceFeeds remains committed to the support of the mainstream and high quality bona fide retail and institutional firms in bona fide jursidictions which operate a genuine electronic trading system, as well as the support of their technology partners.
Our continued research alongside these firms aims to engender and facilitate the very top level of quality possible in today’s highly sophisticated electronic trading environment, and in order to do so, stands vehemently against the lowbrow and back street nature of binary options brands.