In the ever-evolving world of online trading, some brokers have found ways to blur the lines between legitimate trading services and multi-level marketing (MLM) schemes. One of the most deceptive strategies in this space is the broker-run MLM under broker licence—a scam where a regulated or white-label broker disguises a classic pyramid recruitment model behind the legitimacy of its trading licence. This tactic not only endangers investor capital but severely undermines the integrity of the brokerage industry.

What Is an MLM in the Context of a Broker?

A multi-level marketing (MLM) structure typically involves:

• A central organisation (in this case, the broker)
• A hierarchy of recruiters or affiliates
• Commissions based on recruiting new members, not just product or service use

When run under a broker licence, the scheme is masked as a trading referral programme or investment partnership, but in reality, it functions as a recruitment-based earnings machine with little focus on actual trading or financial services.

How the Scam Works

1. Broker Offers ‘Income Plans’ Tied to Recruitment

Instead of traditional trading incentives, the broker offers:

• “Passive income” for building teams
• Bonuses for referring others who deposit, not trade
• Rank-based rewards (Bronze, Silver, Gold, etc.)
• Special perks like retreats, cash bonuses, or luxury items

All of this is tied to downline activity, not performance or client retention.

2. Trading Takes a Backseat

In many cases:

• Trades are rarely monitored
• Fake performance dashboards are shown
• Real trading platforms are underused or intentionally made confusing
• Focus is on bringing in new “investors,” not trading education

The broker may provide replicated accounts, pooled funds, or managed portfolios that give the illusion of growth—but are not independently audited or regulated.

3. Commission Is Based on Deposits, Not Volume

Unlike legitimate Introducing Broker (IB) or Affiliate programmes (where commissions are earned based on client trading activity), this model rewards:

• Flat fees for new sign-ups
• Percentage bonuses for deposit size
• Deeper payouts based on how many layers of referrals are added

This creates a Ponzi-like incentive to keep recruiting, regardless of actual trading outcomes.

4. Disguised as ‘Authorised by Licence’

The most dangerous part is that the MLM is run under the guise of a legitimate broker licence. The broker might be:

• A white-label of a real regulated entity
• Registered in an offshore jurisdiction
• Using a clone or expired licence number

This gives the MLM an air of credibility—making it easier to recruit unsuspecting traders.

Real Case: Broker Runs Recruitment Pyramid With Fake ROI Dashboard

A broker advertises a “trading ecosystem” where you can earn 12%–18% monthly by referring new traders. There’s a dashboard showing automated gains, referral trees, and wallet balances. However, upon withdrawal, users are told:

“Withdrawals are paused pending internal audit. Please recruit more to unlock your payout ratio.”

Further investigation reveals the broker is a white-label with no direct regulatory oversight, and funds were never traded—just circulated between downlines.

Why This Is So Dangerous

The broker-run MLM under broker licence scam is dangerous because:

• It hides behind legitimate licensing structures
• It exploits people’s trust in regulation
• It draws in entire communities and families through peer recruitment
• It undermines genuine trading efforts by focusing on deposits, not education or strategy

Eventually, once recruitment stalls, the scheme collapses—or the broker vanishes, leaving behind unrecoverable deposits.

Red Flags to Watch For

• Focus on team-building instead of trading performance
• High, guaranteed returns tied to recruitment milestones
• Lack of trade transparency or third-party audit of profits
• Confusing or misleading use of licence numbers or regulatory logos
• Excessive dashboard marketing over platform trading metrics
• Withdrawal conditions tied to recruitment goals

How to Protect Yourself

1. Verify the Broker’s Licence Independently
Search the licence number on the official regulator’s website (e.g. FCA, ASIC, CySEC). Ensure the entity matches the broker name and website domain.

2. Avoid Trading Schemes That Require Recruitment
Legitimate trading profits come from the market—not from building a downline or hitting deposit targets.

3. Ask for Proof of Trading, Not Just ROI
If a broker promises earnings, request trade records, platform screenshots, and third-party audit links (e.g. Myfxbook, FX Blue).

4. Watch Out for Pressure Tactics
If you’re being pushed to upgrade “levels” or make larger deposits to earn more referral income, it’s likely a pyramid in disguise.

5. Never Recruit Others Without Full Due Diligence
If the scheme collapses, recruiters may be held responsible for promoting fraudulent activity—even unknowingly.

Regulatory Warnings and Action

Regulators have begun cracking down on hybrid broker-MLM models. In many jurisdictions, brokers must not operate pyramid structures or link commissions to deposits without proper licensing and transparency. If you believe a broker is running an MLM under a regulated licence, report them immediately with:

• Screenshots
• Recorded pitches
• Wallet or dashboard histories
• Recruitment documents

Conclusion: A Broker Licence Doesn’t Justify a Pyramid

The broker-run MLM under broker licence scam is one of the most sophisticated frauds in the retail trading world. It preys on trust, exploits regulatory grey areas, and masks itself as a legitimate trading opportunity. Don’t be fooled by dashboards, rank systems, or passive income promises—if recruitment drives earnings, you’re not trading, you’re feeding a pyramid.

To learn how to vet brokers, detect hybrid fraud models, and build a real trading business, enrol in our expert-led Trading Courses designed to empower retail traders with clarity, skill, and integrity.