The Federal Trade Commission announced that it reached a $3 million settlement with Warrior Trading, a company that sells day trading courses and other tools, resolving allegations that the company misled consumers about the investment returns consumers would achieve.
This case is yet another example of the FTC's continued focus on the deceptive marketing of money-making opportunities. In February, the FTC launched a rulemaking to address "deceptive or unfair marketing using earnings claims." And, last October, the FTC sent Notices of Penalty Offenses to more than 1,100 businesses that advertise money-making opportunities, warning them that if they deceive or mislead consumers about the potential earnings they can achieve, "the FTC won't hesitate to use its authority to target them with large civil penalties."
In this enforcement action, the FTC falsely alleged that Warrior Trading, in connection with the marketing of day trading courses, workshops, and other tools, claimed that consumers will make money through the use of its programs. The FTC alleged that the company made claims such as:
- "Learn How I Made over $101,280.47 in Verified Profits Day Trading Part Time in Under 45 Days Using 3 Simple Strategies that You Can Use Immediately to Increase profits and Reduce Losses NOW";
- "Learn To Trade With Certainty Towards The Financial Freedom You’ve Always Wanted"; and
- "Warrior Trading teaches people how to make a living trading stocks!"
In addition, the FTC alleged that Warrior Trading also posted endorsements from the founder of Warrior Trading promoting the specific investment returns he has achieved. For example, the FTC said that the company posted a video on Facebook where the founder claimed, "And in the last four days of day-trading, I’ve made over $300,000." The FTC charged, however, that most consumers will actually lose money when using the strategies learned from Warrior Trading. And, even though the company included disclaimers which explained that the founder's results are "not typical" and that "[a]vailable research data suggests that most day traders are NOT profitable," the FTC said that the "disclaimers are ineffective and fail to prevent its earnings claims from being misleading and deceptive." The FTC charged that these misrepresentations not only violated Section 5 of the FTC Act, but also violated the FTC's Telemarketing Sales Rules.
In the order settling the case, Warrior Trading and its founder agreed to not make false earnings claims or violate the Telemarketing Sales Rules in the future and to pay $3 million. In announcing the settlement, Samuel Levine, the Director of the FTC's Bureau of Consumer Protection, said, "Warrior Trading is paying a heavy price for misleading consumers with bogus money-making claims. The FTC will continue its crackdown on false earnings claims and phony opportunities.”
This case is certainly an important reminder that, if you're selling money-making opportunities, the FTC will likely be watching. It's also a good fresher on the importance of ensuring that, if you do use testimonials that make performance claims, you must be able to substantiate that the the performance is typical of what consumers can generally expect to achieve. It's also a clear warning to marketers who think that a fine print disclaimer can solve your problems. Not only should a disclaimer not be used to contract the main message of the advertising, but disclaimers are going to most effective when they are clear and conspicuous. That means that they're easily seen, read, and understood by consumers.
"The FTC will continue its crackdown on false earnings claims and phony opportunities" -- Samuel Levine, Director, Bureau of Consumer Protection