Breaking: The Special Master in My Forex Funds Case Recommends Dismissal and Sanctions Against CFTC

A Special Master has recommended that a U.S. court impose sanctions and "dismiss with prejudice" the case brought by the Commodity Futures Trading Commission (CFTC), accusing the agency of deliberately misleading the court in its high-profile enforcement action against Traders Global Group Inc., the company behind My Forex Funds.

According to Special Master Jose L. Linares: “In multiple instances, with full knowledge of the error in a sworn declaration submitted to the Court, rather than be upfront, direct, and transparent, the CFTC took deliberate steps down a path of obfuscation and avoidance. In this case in particular, the need for specific deterrence is paramount, and a significant sanction is warranted.”

The court document redacted the names of the attorneys and investigators responsible for the alleged mishandling of the My Forex Funds case. However, from the previous court filings, it is clear that CFTC's lead attorney Ashley Burden was involved in the case. The CFTC investigator whose name came up in the previous court filings is Matthew Edelstein.

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CFTC Staff Already on "Administrative Leave"

The court recommendation came a week after the CFTC placed some of its staff on administrative leave. Although the agency did not detail, a Bloomberg report revealed that four lawyers and one investigator were sent to administrative leave due to their misconduct in the My Forex Funds case.

The CFTC initially charged My Forex Funds and its CEO, Murtuza Kazmi, with fraud at the end of August 2023. According to the regulator, the company generated at least $310 million in fees from its proprietary trading business. The platform had more than 135,000 customers between November 2021 and its forced shutdown.

However, the regulatory action—including a temporary restraining order and asset freeze—effectively shut down the business overnight. Following a legal challenge by the defendants’ lawyers, a court unfroze most of Kazmi's assets.

Sanctions Request against the CFTC

My Forex Funds even filed a sanctions motion against the CFTC for alleged misrepresentation of facts. According to previous court filings, the regulator’s lead attorney admitted during an evidentiary hearing that he was “careless and sloppy” during the investigation. The CFTC, however, argued that the evidence presented by the defendants showed the agency’s “mistakes were limited and inadvertent.”

Interestingly, Acting CFTC Chair Caroline Pham, who was then a Commissionaire at the agency, came out critical against the agency's alleged misconduct in the investigation against My Forex Funds.

Read more legal view: CFTC Commissioner Drama and My Forex Funds Case - "Government Lawyers Can't Afford to Slip"

Pham responded to the latest court recommendation: “As described in detail in the Court’s report, the CFTC engaged in willful and bad faith conduct by making multiple false statements to the Court and other ‘numerous instances of sanctionable behavior’ over the course of a year. This is inexcusable.”

In a joint statement, My Forex Funds’ legal counsel—Quinn Emanuel and King & Spalding—stated: “The CFTC falsely accused our clients of fraud, shut down their businesses, and froze all of their money on the basis of a false, secret submission to the court. As the Special Master’s findings confirm, the CFTC staff misled the court and violated their duty of candor in order to freeze our clients’ assets. Those already serious transgressions were then compounded by a series of decisions by the CFTC to obfuscate and minimize its wrongdoing—in the Special Master’s words, intentionally and in bad faith."