Commodity Futures Trading Commission (CFTC) Commissioner Caroline D. Pham has issued a statement calling for immediate action to address alleged misconduct by CFTC staff in an ongoing enforcement case against Traders Global Group Inc., the operator of prop trading firm My Forex Funds (MFF).

CFTC Commissioner Calls for Action on Alleged Misconduct in My Forex Fund Case

In her statement published this week, Commissioner Pham expressed grave concerns over allegations made in a Rule 11 sanctions motion filed in the CFTC v. Traders Global Group case. The motion reportedly accuses CFTC staff of making false statements to the court over a six-month period.

"This is a grave matter, and we, the Commission, will be subject to intense scrutiny over how we handle the alleged CFTC misconduct," Pham stated. "This type of behavior cannot be tolerated at a law enforcement agency."

For My Forex Funds, this could be a turning point in the case that has been ongoing since last September, as the proprietary trading firm has consistently suggested that the commission may have misinterpreted some of the payments it made, which led to the freezing of its assets.

Moreover, in November, MFF distanced itself from the accusations made by the commission and questioned the CFTC's jurisdiction over its business. The motion argued that transactions between MFF and its customers fall outside the regulatory scope.

In early March, Finance Magnates reported that representatives of the prop firm would seek sanctions against the CFTC due to alleged misrepresentation of facts. The company is citing what it describes as a "gross abuse of power" by the SEC, as highlighted by a court order, in handling the DEBT Box case, paralleling the CFTC’s misrepresented facts and its "staff [who] acted in bad faith."

“Recognizing that sanctions are an extraordinary remedy, they are necessary here to condemn and redress the CFTC’s serious abuse of the ex parte process and its authority as a government enforcement agency,” the motion filed in a New Jersey court stated.

The motion is seeking an "evidentiary hearing so that the CFTC’s pattern of misconduct and its effect on Defendants’ rights can be fully understood and redressed."

Pham's Allegations Towards CFTC in the My Forex Funds Case

Pham outlined several recommendations to address the situation:

• Reassign the case to CFTC Enforcement staff from a different regional office or headquarters.
• Have the CFTC's Office of General Counsel or the U.S. Department of Justice handle the Rule 11 sanctions motion, rather than the Division of Enforcement.

The Commissioner expressed shock that these steps had not already been taken, noting that it took six months for the Commission to be notified of the court's admonishment of CFTC conduct in the case.

Pham also raised broader concerns about the CFTC's internal processes, stating she has previously identified instances where the Division of Enforcement "has not been candid with the Commission in its recommendations on enforcement actions, including omitting evidence and legal arguments."

"It is unacceptable to 'hide the ball' from the Commission, especially to get a rubber stamp approval to railroad the public into settlements that deprive Americans of their Constitutional rights and property," Pham declared.

The Commissioner called for cultural reforms at the CFTC and greater transparency, stating, "Sunlight is the best disinfectant."

In conclusion, it's worth asking whether, if not for the market watchdog's crackdown on My Forex Funds, we would have witnessed the subsequent issues in the entire retail prop trading industry that emerged in February?