Last week the Daily Mail reported on a company called “Zeux” which had taken out ads on London Underground trains for a cryptocurrency investment.
If you read Zeux’s adverts, you could be forgiven for thinking that the London Capital Finance collapse never happened. Zeux misleadingly compared its capital-at-risk investment with FSCS-backed deposits, and portrayed it as an easy-access savings account.
Losing interest in your bank? Earn 5% interest with Zeux
Best part? You can take your money out at any time.
Its website further claimed
Your funds are secured at all times by asset-backed portfolios of over collateralised loans. In addition this fund is secured by both WeCash and Zeux.’
(I have no idea whether Zeux is meant to be pronounced “zyeugh” as in French, “zay-ucks”, or “zooks”. So let’s just go with “zux”.)
While Zeux is regulated as a payment provider, the investment involves investors lending their money to Zeux, who uses the money to buy cryptocurrency, which it sends to a Chinese firm called WeCash, which then lends the money on to borrowers.
In other words, investors risk up to 100% loss if WeCash and Zeux run out of money, and its loans (which consist of loans of cryptocurrency to customers in China) are not valuable enough to repay investors.
The FCA has repeatedly confirmed, notably in its Second Supervisory Notice to London Capital and Finance shortly before its collapse, that it is misleading to compare the rates offered by capital-at-risk investments with those from FSCS-protected deposits.
In a Q&A with the Daily Mail, Zeux gibbered:
The economy is changing and UK consumers need to adapt if they want to achieve interest rates which are common in Asia or the US.
This fails to recognise that if you are willing to take some investment risk, a return of 5% per year can be reasonably hoped for from a diversified stockmarket portfolio, without going to the lengths of investing in Chinese cryptocurrency startups.
Interest rates from deposits may well be higher in Asian countries with higher inflation rates. Risk-free deposit rates in the US are at the same rock-bottom level as in the UK, so at this point Zeux appears to be throwing out random names of countries mixed with some FOMO.
In the final part of the Q&A, Zeux claimed
We’ve been in a dialogue with the FCA regarding the advertising, which has led to comments from them, which we have taken on-board and will continue to work and accommodate these comments in order to meet the FCA’s expectations and requirements.
Two days later the FCA hit back and revealed that, in fact, Zeux had given “a misleading impression of the conversations we have had with them”, and that Zeux had agreed to stop taking in new money and pull all its ads “including on their website, social media and public advertising on the transport network of the product in question”.
The adverts however remain up on the Tube. The FCA are said to be engaging with Transport for London on their timescale for removing Zeux’s misleading adverts.
From its wittering about “a dialogue”, Zeux seems to think the ban on taking new money in will be lifted at some point. Which would mean that as long as it can keep its ads circulating through London, it’s all gravy.
Abdication of responsibility by TfL
Transport for London meanwhile has disclaimed responsibility, saying “Ultimately, as with all advertising in the UK, it is the advertiser’s responsibility to ensure that their advertising meets the required standards”.
This is not good enough. We aren’t talking about pictures of women in bikinis trying to get you to join a gym. As we’ve seen far too often, the consequence of consumers falling for misleading ads and assuming “if the London Underground put the ads up it must be a safe investment” can be disastrous.
Would Transport for London run adverts for potentially dangerous pills on the basis that it’s the advertiser’s problem whether they comply with pharmaceutical regulations?
If Zeux had stopped paying their advertising bill, it’s a safe bet that it wouldn’t have taken more than a few days before TfL found the time to put temporary stickers over all their adverts until a new promotion could be sourced.
Unfortunately, TfL have done nothing wrong from a legal perspective and the regulatory system is designed to allow publishers of adverts to abdicate responsibility in this way, and take money for carrying misleading investment adverts for as long as the investment provider itself can get away with it.
Should I invest in Zeux?
This blog does not give financial advice. The following are statements of publicly available facts or widely accepted investment principles, not a personalised recommendation. Investors should consult a regulated independent financial adviser if they are in any doubt.
As with any individual loan note to a small unlisted company, this investment is only suitable for sophisticated and/or high net worth investors who have a substantial existing portfolio and are prepared to risk 100% loss of their money.
As an individual, illiquid security with a risk of total and permanent loss, Zeux’s product is much higher risk than a mainstream diversified stockmarket fund.
Before investing investors should ask themselves:
- How would I feel if the investment defaulted and I lost 100% of my money?
- Do I have a sufficiently large portfolio that the loss of 100% of my investment would not damage me financially?
- Have I conducted due diligence to ensure the asset-backed security can be relied on?
If you are looking for a “secure investment” or “savings account alternative”, you should not invest in corporate loans with a risk of 100% loss.
Apart from misleading advertising. Has this company done anything actually wrong? They are a payment provider first and foremost with glowing reviews from financial experts in the telegraph, Forbes and Reuters.
This review insinuates that they are a dodgy firm?
Your mentioning them in the same breath as LCF.
There website clearly states “Your funds held within the 5% Easy Access Money Pot are not covered by the Financial Services Compensation Scheme. Capital at risk.”
Why do all your reviews tarnish companies. When it says capital at risk, it’s clear that you could lose all of your money.
Brev, FSCS does not cover investment performance. You should know that. A Barclays stock and share Account could also leave you with a complete loss of capital.
If they are so terrific at being a payment provider why do they feel the need to raise money from misleading ads?
Comparing high risk corporate loan notes with FSCS-protected savings accounts and repeatedly referring to them as “secured” = misleading, as the FCA confirmed when they shut down LCF inter alia.
Misleading the public as to the risks of the investment you are offering = wrong and dodgy.
Boilerplate risk warnings are not an excuse for misleading financial promotions. This is financial compliance 101.
My reviews state the facts. Companies which produce misleading financial promotions tarnish themselves.
When it repeatedly refers to the investment as “secured” and easy access, it’s not clear in the slightest to a large proportion of the man on the Clapham omnibus, or the tube train.
Only if you invest your entire Barclays stocks and shares account in a single corporate loan note – like Zeux’s – or something similarly undiversified.
Hi Brev,
Jeff has a point “If you read Zeux’s adverts, you could be forgiven for thinking that the London Capital Finance collapse never happened.“
That’s opinion; not fact…and your opinion at that.
“Only if you invest your entire Barclays stocks and shares account in a single corporate loan note – like Zeux’s – or something similarly undiversified ” – incorrect.
You could invest into a Barclays Stock and Shares account and into a basket of diverse stocks (not loan notes) and those stocks could all hit 0 and you have the possibility of complete 100% loss of capital and no FSCS coverage.
Your posts are informative but riddled with negativity and then your rebuttals are just totally misleading themselves. Pot calling the Kettle black
Hi Jason
I agree that Brev if frequently negative – but for a reason. The recent history of unregulated products is littered with disappointment & fraud.
And I suspect your Barclays comment is a bit tongue in cheek? Yes, listed companies do go bust – especially on AIM where, frankly, LSE / FCA / Fraud Squad have been distinctly lacking. But an investment in 10 – 20 companies that people of heard of – say in the FTSE350 would be incredibly unlikely all to go bust.
I don’t think Brev has an agenda – other than to warn people of pitfalls they may not have spotted. By all means look at these investments, but do so with eyes open and with money you can afford to loose.
I’m an adventurous investor – almost all the money I manage for family is in AIM and I sleep at night.
But an unregulated Chinese cryptocurrency lender………..
Good luck with your investments – a definition of a market is that one person’s decision to sell is another’s opportunity to invest. You may be right & me wrong – who knows?!
He has compared a regulated money processor with LCF and then in the same breath says Zeus are misleading the public?
“But an unregulated Chinese cryptocurrency lender”
Zeux is regulated all be it not covered via FSCS for this specific investment. This article has even confused you.
My point is, the tone of the article like every article on this forum insinuates that if you invest, you are almost certain to lose your money.
I’m not saying this is a safe investment but don’t preach about misleading ads then mislead people.
Jason, You seem to be making a common mistake. A regulated provider can sell unregulated investments. These loan notes are unregulated investments so it’s a valid comment. The line you quote as opinion is also factual – the statements being used are the same as used by LCF and the ones that caused FCA to step in so it’s valid to say it’s as if LCF never happened.
Warning savers about into buying misleading unregulated investments thinking they are savings is something that you should be happy about, it’s not negativity if it highlights warnings missing from the adverts.