Judge sanctions CFTC over agency's conduct in My Forex Funds case
May 14 (Reuters) - A federal judge in Camden, New Jersey has thrown out a Commodity Futures Trading Commission lawsuit against a U.S.-Canadian trading firm after finding that the U.S. agency acted in bad faith and made false statements, according to a docket entry on Wednesday.
U.S. District Judge Edward Kiel dismissed the CFTC's 2023 case against Traders Global Group, also known as My Forex Funds, and awarded the company attorney fees as a sanction.
Lawyers for the trading firm and its CEO Murtuza Kazmi said in a statement that the case should never have been brought.
"Our clients are — and always have been — compliant with the law and innocent of the allegations and claims brought against them," the statement from Quinn Emanuel Urquhart & Sullivan and King & Spalding said.
Acting CFTC Chairman Caroline Pham said in a statement that the agency's conduct was "inexcusable."
"The CFTC must now accept accountability so that appropriate corrective action can finally be taken to address the conduct issues, and the CFTC can put this behind us and move forward to restore the agency's credibility and reputation," Pham said.
Kiel's decision adopted a report and recommendations, opens new tab by a court-appointed special master. The report, which was unsealed on Tuesday, found the CFTC "acted willfully and in bad faith on several occasions" during the litigation.
The CFTC had accused My Forex Funds and Kazmi of fraudulently booking at least $310 million in fees from thousands of customers. The agency said My Forex Funds illicitly transferred C$31.5 million to an unidentified account outside of the United States. As a result, another federal judge froze the assets of both Kazmi and My Forex Funds.
But CFTC employees received an email before the case was filed from the Ontario Securities Commission confirming the C$31.5 million transfers were legitimate tax payments to Canadian authorities, according to special master Jose Linares, a retired federal judge.
Despite possessing the email, the CFTC proceeded with the lawsuit and alleged that the C$31.5 million transfers were evidence that Kazmi "may — and is likely to — transfer or dissipate" his assets.
The CFTC did not disclose the email until four months after bringing its case, in a footnote in a court filing, the report said.
"At multiple points in time, the CFTC also had the opportunity to correct the false statements and impressions that had been made, yet it chose to go a different route in violation of its duty of candor to the Court," Linares said in his unsealed report.
An unidentified CFTC attorney also admitted his conduct was "careless and sloppy," Linares said.
(Additional reporting by Chris Prentice)
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