Yahoo Finance Barefoot Investor attacks eToro in ‘misleading’ article
Barefoot Investor Scott Pape and eToro have been locked in a stoush after Pape accused the trading platform of "luring" inexperienced investors into complex trading.
In a recent article, Pape took aim at investment apps that gamify stock market trading by allowing users to ‘copy’ more experienced users’ investment portfolios and trading moves, warning they put young Australians at risk.
“What could possibly go wrong with entrusting your money to an anonymous username on a website to trade on your behalf? Quite a lot actually,” he wrote in the article.
He claimed that eToro’s advertisements, which feature Hollywood actor Alec Baldwin, “tries to lure young, inexperienced newbies”. The use of language such as “cheat code” and “best players” makes stock market trading feel like a game, he added.
WATCH BELOW: ALEC BALDWIN IN ETORO AD
Pape also claimed that the platform was reportedly responsible for 1,200 young Australians who lost money last year after one of the platform’s top traders “went rogue” for 48 hours.
However, an eToro spokesperson told Yahoo Finance that Pape’s claims were misleading and this incident was not an eToro trader, and did not occur on the eToro platform.
“eToro maintains a responsible trading and investing ethos. We recognise that all investing carries inherent risks and clients should seek to make informed decisions to minimise these risks,” the spokesperson said.
“We encourage Australians to invest responsibly by adopting a long-term mindset, only investing what they can afford, and diversifying their portfolios. The stock market is not a get-rich-quick scheme, especially during the global pandemic when markets have been extremely volatile.”
eToro, valued at over $1 billion, was the first platform to pioneer copy trading, a style of social investing that allows users with little experience in the stock market to ‘copy’ more experienced users’ investment portfolios and trading movements.
Since then, other platforms have cropped up, such as AvaTrade, Pepperstone, Vantage FX, IC Markets and more.
‘The public should have a say’: eToro
There are only 1,300 ‘Popular Investors’ in eToro’s Copy Trading program, the spokesperson added. Each one has to meet a number of criteria, such as a proven track record, provide transparency about their investment strategy, maintain a low-risk score, and comply with leverage restrictions.
In response to Pape’s criticisms of copy trading, the spokesperson said trading apps give retail investors greater access to the stock market, with retail investors accounting for as much as a quarter of trading volumes on busy trading days.
“We believe that the increase in retail participation is a positive force for good in capital markets. The public should have a say in public markets, and now the public is understanding that their investments can and should impact the markets,” the spokesperson said.
“The recent activity demonstrates that information is no longer held by the few but is widely accessible to the many. Wall Street does not necessarily have an edge anymore.”
Yet according to Pape, the rise of these trading apps is how “Wall Street has dreamed up (yet another) way to screw people.”
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