page title icon CFTC vs My Forex Funds – surprising details and implications of the full CFTC complaint

November 12, 2023

Any of us who follow and/or actively participate in prop trading knew that at some point financial regulators would get involved. The industry is growing so incredibly fast and signing up so many new traders that someone had to take notice. Eventually all gold rush towns get a sheriff, whether they truly need one or not.

Screenshot of the front page of the CFTC's complaint against My Forex Funds.

Let me introduce the new sheriff in town – the Commodity Futures Trading Commission (CFTC). On September 1st they came into our little prop trading community guns blazing. 

The CFTC’s first target was My Forex Funds, which was a subsidiary of Traders Global Group and one of the biggest prop firms in the world. The CFTC made a number of allegations, threw out the words “ponzi” and “fraud,” closed all of MFF’s accounts and sauntered off into the sunset. 

Was this the first of many such charges brought against prop firms? Is the whole industry in danger? Is MFF ever coming back?

In order to try and sort that out, I read the full 40-page complaint against MFF. (FORTY PAGES!!!). 

Here’s some of the things that jumped out at me for one reason or another.

The CFTC complaint against My Forex Funds is pretty repetitive

Ok, not the most important takeaway here, but I saw so many people reference the number of pages (40!!!) when talking about the CFTC’s charges – as if the sheer volume of pages made the charges even worse. 

This document honestly reads like a high school term paper in which the author had to reach a page limit or risk losing a letter grade – there’s a lot of repetition. The term “relevant period” was used 37 times. The word fraud was used 29 times. And it’s double spaced!

I’m just saying, a properly edited document gets the CFTC’s point across in 10 pages, max. Does that make a difference? No, not really, but let’s stop equating page counts with the severity of the charges.

On to the important stuff…

The CFTC does not like drawdown limits

Every prop trading firm that I know of has some form of drawdown limits in place. Drawdowns are a staple of the industry and they just make sense. If you are in the business of giving traders capital to trade, of course you would set up a limit to how much that trader can lose before you pull their funding or fail their evaluation. 

I know we all love to be optimists, but it makes zero sense for a prop firm to give money to a perpetually losing trader with the hopes that he or she will turn things around. This is why drawdown limits exist.

The CFTC voices a different perspective in their complaint against MFF. “The purpose of the drawdown rule is to provide (My Forex Funds) with a bad faith pretext to disable customer accounts.” Not giving money to traders because they’re bad traders is a “bad faith pretext?” Really? Losing too much money seems like the only pretext that should matter when it comes to trading. 

There’s two ways to make sense of the CFTC’s argument. Maybe the CFTC is just talking specifically about MFF’s drawdown, which was equity-based and not explained as clearly as it could have been on their website. Perhaps they believe My Forex Funds made their drawdown rules intentionally opaque to make things harder for traders. Very possible, considering everything else MFF was apparently doing to hamstring their traders.

The other interpretation is far more dire for the prop trading industry as a whole. Perhaps the CFTC thinks all drawdown limits are a “bad faith pretext” for terminating accounts. It is true that violating daily and/or overall drawdowns are the reason why most prop traders lose their accounts, but, again, losing money seems like a good reason. But if the CFTC thinks all drawdown limits are bad, prop trading as we know it will be in for some drastic changes.

I suppose there’s also a third possible explanation: the CFTC, despite this drastic intervention, really doesn’t understand the prop trading business. 

My Forex Funds was making substantial payouts

Obviously MFF comes out looking pretty bad in this complaint – again, the CFTC uses the word fraud 29 times in this document – but even according to the CFTC, My Forex Funds was making substantial payouts to its traders.

The complaint clearly states “(My Forex Funds) pays customers who trade successfully.”

According to the CFTC’s numbers, MFF paid out $137 million during the time they were under investigation (November 21, 2021 to the present). During the same time period MFF took in $310 million in fees, so MFF paid out 44% of its income to its successful traders. That’s a lot more than I would have expected from an alleged “fraud”.

I’m not entirely sure the CFTC’s math adds up, however. The CFTC also stated that MFF had around 135,000 clients during the “relevant time period.” So let’s do a little math. With that many clients, MFF took in around $2,296 per customer but paid out an average of $1,015 per customer. I know there were some big fish buying numerous accounts with MFF, but those averages still seem really high. Something doesn’t quite add up. 

Was My Forex Fund a Ponzi Scheme?

Not technically. There seems to have been a lot of defrauding going on at MFF, but if you read the CFTC’s complaint carefully, they don’t directly call My Forex Funds a Ponzi Scheme. Instead they say, “in a manner similar to a Ponzi scheme.” MFF was a lot of things – most of them bad it would seem – but a Ponzi scheme it was not. 

According to the IMF, a Ponzi scheme is “a type of investment fraud in which returns are paid to investors out of the money paid in by subsequent investors rather than from genuine profits…” MFF wasn’t paying off its original traders with deposits from new investors. It was paying off successful traders with money from traders who had failed their challenges. 

That may seem like a fine line, but it bothers me that every time any sort of financial fraud takes place, the term “Ponzi scheme” is thrown out there, even by the CFTC itself. Can we stop dragging the name of poor old Charles Ponzi – a man who literally once gave the skin off his back to a burn victim (before he defrauded investors of more than $20 million)  – through the mud?

MFF’s CEO Murtuza Kazmi’s “luxury” automobiles

In the press release announcing the charges, the CFTC said that My Forex Funds CEO Murtuza Kazmi used some of the MFF proceeds to “purchase luxury homes and automobiles.” I assumed we were talking about a top end Mercedes or something, but noooooo, Kazmi went all out. 

The full CFTC release reveals that Kazmi bought a $1.6 million Lamborghini Aventador and a $3.3 million Bugatti “race car.” Wow. That’s really flaunting your wealth. 

MFF was illegally trading “off exchange”

As I’ve explained before, prop firms have mostly evaded regulation by claiming they are educational companies that only offer simulated trading or that they are proprietary trading firms that trade their own money. 

MFF was doing things a little differently than most North American based prop firms, which might be the reason the CFTC singled them out.  Apparently MFF was acting as the counterparty to almost all of their trader’s trades. Essentially they were making the market. 

That’s obviously illegal under US securities laws. 

Regulation 5.3(a)(6)(i), 17 C.F.R. § 5.3(a)(6)(i) (2022) clearly prohibits such off-exchange transactions, and it seems hard to believe no one at MFF knew they were in clear violation.

Other US-based prop firms use third-party brokers like EightCap or ThinkMarkets, which is much more legalish than just creating your own market.   

Is prop trading a fraud according to the CFTC?

There is obviously some pretty damning stuff in the CFTC complaint against My Forex Funds. If all the allegations are true, MFF was working very hard behind the scenes to undermine its traders. They also were acting as a counterparty against their own traders. That’s despicable, and they should be penalized. 

However, a lot of what is found in this complaint, could more or less be described as “business as usual” for a lot of prop firms. For example, as I mentioned above, the CFTC takes real issue with drawdown rules, which every prop firm uses. 

There also seems to be a lot of pearl clutching about the fact that when MFF paid out successful traders, they weren’t paying them from the trading proceeds, but from the income generated by other traders’ failed challenges. 

This also seems pretty par for the course. All prop firms generate at least some of their income from failed challenges. And if I’m a trader getting paid out, who cares if the money is coming from the firm’s trading proceeds or its evaluation proceeds? 

It’s a significant distinction for the CFTC, apparently. 

Reading this complaint, it seems like the CFTC might take issue with any prop firm that makes income off of evaluation fees, which is, or course, all of them.

So what does the CFTC think about prop trading firms in general? We still don’t know. Perhaps this is an isolated charge, or perhaps this is a shot across the bow of the entire industry. We shall see.

@#$&@ My Forex Funds!

It probably seems like I’m doing a lot of defending of MFF, and I am in some cases, but I’m also not ignoring some of the truly awful things they were allegedly doing.

The CFTC apparently has in its possession multiple emails between an MFF employee known in the complaint as “Traders Global Employee A” and a third-party software “advisor.” The emails are pretty infuriating. 

Some of you who are in the know can guess who Traders Global Employee A actually is, but I’m not going to speculate. I’ll just say this – Traders Global Employee A sucks. He or she is a complete jerk who was constantly looking for ways to undermine successful traders. 

Traders Global Employee A clearly talks about trying to impede traders progress, tells the advisor to “slip them to hell” and relishes terminating successful accounts (“the account is now dead :D”). 

In addition to tripping up traders with the slippage from “hell,” MFF also used tricky commissions to deplete equity, used software that obscured true prices from traders, and did a number of other things to undermine successful traders and minimize payouts.  

I can’t help but wonder, if MFF doesn’t pull all these stunts against traders, how much do they still make? According to the CFTC they took in $310 million and paid out $137 million in a little less than two years. That’s $173 million in profit, excluding other operating costs. Even if their other operating costs were really substantial, MFF still made a fortune. 

So if they aren’t cheating traders, maybe Kazmi can afford one less Bugatti, but they still make a lot of money, do things the right way, and maybe the CFTC isn’t threatening the entire prop industry today.

@$#%@ My Forex Funds!

1 thought on “CFTC vs My Forex Funds – surprising details and implications of the full CFTC complaint”

  1. Any firm that has funded traders in live sim is violating regs. Virtually all of them do. Traders funds that come from live sim can only be paid out from fees unless trades are copied into the live market. This case is clear cut.


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