There was news recently surrounding Online Trading Academy (OTA). The company was sued by the Federal Trade Commission (FTC) for using false and misleading claims in their advertisements, and for misrepresenting a “patented trading strategy.”
The complaint was filed by the FTC, not the SEC. That is because the SEC oversees the securities industry, the Federal Trade Commission was created to “protect America’s consumers.” Online Trading Academy sold a trading program, and was not involved in selling securities.
As a reminder, if they market a newsletter or trading program they do not necessarily need to register as investment advisors.
I much prefer writing my own content, but the excerpts from the press release issued by the FTC, and the Plaintiffs Memorandum of Law (excerpts included below) make for some compelling reading.
Especially if you know someone who has been involved with them. Their radio ads and marketing copy can seem very persuading! And by using “client testimonials” or endorsements (normally frowned upon in the advisor and broker universe) their trading program seems too good to be true.
The Federal Trade Commission (FTC) has sued Online Trading Academy. The FTC alleges that OTA uses false or unfounded earnings claims to sell “training programs” costing as much as $50,000. OTA has collected more than $370 million from consumers nationwide within the last six years.
According to the FTC, Online Trading Academy misrepresents that it has a patented “strategy” that anyone can use to generate substantial income from trading in the financial markets. Online Trading Academy claims that its strategy is designed to generate income in any market, “whether it’s going up, down or sideways.”
The company’s claims are often targeted at older consumers. Additionally, OTA “instructors” — salespeople on commission who market Online Trading Academy’s training and strategy to consumers in live events across the county — often hold themselves out as successful traders who have amassed substantial wealth using OTA’s strategy.
However, Online Trading Academy does not track the trading results of its customers, and the FTC alleges that OTA’s own surveys indicate that its customers are not making the type of income Online Trading Academy advertises.
Trading data from a platform used by OTA customers also suggest that the vast majority of their customers do not make any money, and many lose money on top of the money they pay Online Trading Academy. Evidence obtained by the FTC also indicates that instructors’ claims of amassing wealth by using Online Trading Academy’s strategy are false or unsubstantiated.
“It is illegal to make earnings claims in marketing investment opportunities or training, unless the seller has a reasonable basis to make such claims,” said Andrew Smith, the Director of the FTC’s Bureau of Consumer Protection. “Online Trading Academy has used unfounded earnings claims to bilk Americans out of their savings.”
The FTC also alleges that OTA has required customers who request a refund to sign contracts barring them from posting negative comments about Online Trading Academy or its personnel, and specifically from reporting wrongdoing to law enforcement agencies.
Read the entire press release here: https://www.ftc.gov/news-events/press-releases/2020/02/ftc-sues-online-trading-academy-running-investment-training
Excerpts from the Plaintiff Memorandum
OTA radio ads play across the country, from New York City (where they aired over 10,000 times in the last two years) claiming …to “generate daily or monthly income,” calling it “a proven step-by-step approach,” and offers testimonials including a consumer who “made $12,000” in three hours, and another who “made $32,000 in less than seven trading days.” A New York-area radio ad that ran at least 581 times in 2018 featured a supposed OTA “student” claiming “it’s almost like having a second paycheck without having a second job,” and that any ordinary person can do it.
Another New York radio ad, played at least 880 times throughout 2018, offered “more income” through a… “proven step by step approach to investing” that “can work in any market condition,” and “generate active income … and create passive income to build your retirement.” Other OTA ads similarly claim that consumers will learn to “generate income,” or “daily income,” or “monthly cash flow.”
Online Trading Academy’s advertisements also claim that anyone can learn and use their strategy to make money, including claims that:
- “[A]nybody could do this from any level. You don’t need to have a special type of background.”
- All consumers can benefit from Online Trading Academy, “[w]hether you only have a few hours a week or a few hours a month….”
- “80 percent of the individuals that come through our doors don’t know a stock from a rock.”
You can read the entire Plaintiffs memorandum here: https://www.ftc.gov/system/files/documents/cases/12-2_-_tro_memo.pdf