Recent court filings in the lawsuit between the Commodity Futures Trading Commission (CFTC) and My Forex Funds have revealed significant missteps in the regulator’s investigation. The case centers on allegations of fund misappropriation by the proprietary trading platform and its CEO, Murtuza Kazmi. During an evidentiary hearing, Ashley Burden, the lead attorney for the CFTC, admitted his investigation was “careless and sloppy.”
Misrepresentation of Key Financial Transaction
The CFTC initially claimed a CAD 31.5 million payment made by My Forex Funds was misappropriated. However, evidence later showed the payment was made to Canadian tax authorities. Despite having access to this information during the investigation, the CFTC overlooked it, leading to the freezing of the firm’s and CEO’s assets. Burden acknowledged missing a critical email that clarified the nature of the payment, a mistake highlighted by the defendants in their motion for sanctions.
Defendants Accuse CFTC of Bad Faith
My Forex Funds argued that the regulator acted in “bad faith” and failed to conduct a thorough investigation. The CFTC’s probe was limited to collecting records from third parties and taking testimony from a single witness. The defendants emphasized that no employees or customers of the firm were interviewed, undermining the credibility of the investigation.
Internal and External Criticism of the CFTC
The case has also drawn criticism from within the CFTC. Commissioner Caroline Pham publicly questioned the regulatory actions against My Forex Funds and its CEO, signaling internal disagreements about how the investigation was handled. Externally, the defendants’ legal team has pushed for sanctions against the CFTC, citing investigative misconduct.
CFTC Defends Its Actions
In its defense, the CFTC maintained that its mistakes were “limited and inadvertent.” The agency argued that these errors did not constitute bad faith and should not result in sanctions. While admitting to flaws, the CFTC emphasized that its actions do not need to be perfect to meet regulatory standards. It urged the court to deny the motion for sanctions, describing dismissal as a measure of “last resort.”
Potential Settlement in the Works
Reports suggest that My Forex Funds and the CFTC are exploring a settlement. However, the revelations of investigative shortcomings and internal criticism have added complexity to the case. The outcome will likely impact both parties and highlight the importance of rigorous and transparent regulatory practices.
