Canadian Court Delivers Sharp Rebuke to Securities Regulator in Forex Trading Dispute
The Ontario Superior Court has issued a significant ruling that criticizes the conduct of Canada's primary securities regulator while awarding substantial legal costs to a simulated trading firm. In a decision that underscores judicial scrutiny of regulatory actions, the court ordered the Ontario Securities Commission to pay $80,000 to MyForexFunds, marking the highest such amount ever imposed on the watchdog.
Record Costs Awarded Following Asset Freeze
The court expressed clear dissatisfaction with how the Ontario Securities Commission handled its investigation into MyForexFunds, a platform that had its assets frozen for more than two years. The February 20 ruling specifically noted that the court was "not overly impressed with the manner in which the Commission has been carrying out its public interest mandate in this case."
This judicial criticism referenced earlier findings about "frailties in the evidence" and suggested that MyForexFunds' assets should not remain "under an indefinite freeze order." The $80,000 award represents a compromise between the $390,000 sought by MyForexFunds and the OSC's position that even $50,000 would be "unprecedented" for such costs.
Background of the Regulatory Investigation
The Ontario Securities Commission began investigating MyForexFunds in 2023, alleging that the firm and its chief executive may have:
- Traded securities without proper registration
- Provided false and misleading information to regulators
- Engaged in other potential regulatory violations
Despite these allegations, the regulator has not issued any formal notice of allegations against the company. MyForexFunds was forced to shut down operations in August 2023 when the United States Commodity Futures Trading Commission sued the company for operating what it described as a Ponzi-like scheme, though this charge was later dismissed.
Company Operations and Customer Impact
MyForexFunds, legally known as Traders Global Group Inc., operated as a foreign exchange proprietary trading firm based in Ontario since its founding in 2020. The company's business model involved customers paying sign-up fees to trade with simulated capital in a virtual market environment. Successful traders who passed initial evaluations and adhered to specific trading rules could receive a share of their theoretical profits.
The platform's closure and subsequent asset freeze significantly impacted customers. However, the company announced earlier this month that customers who submitted payout requests before the 2023 shutdown will be eligible to receive funds as the receivership process continues to unwind.
Regulatory Response and Broader Implications
Curtis Lindsay, a spokesperson for the Ontario Securities Commission, stated that the regulator is aware of the court's decision but declined to comment on the status or nature of its ongoing investigation. This silence contrasts with the vocal response from MyForexFunds leadership.
Murtuza Kazmi, chief executive of MyForexFunds, declared in a statement that the $80,000 award "is a clear signal that regulatory power must be exercised with accountability and transparency." He further asserted that "we have maintained from the beginning that the actions taken against our company were based on untrue allegations."
Parallel Developments in United States
The Canadian court ruling follows similar judicial pushback against regulators in the United States. Last year, a U.S. judge dismissed the Commodity Futures Trading Commission's case against MyForexFunds with prejudice, meaning it cannot be revived. The American regulator was also sanctioned for misconduct and ordered to pay MyForexFunds US$3.1 million in legal fees.
These parallel developments in both countries highlight growing judicial scrutiny of regulatory actions in the financial technology sector, particularly concerning simulated trading platforms and Forex operations. The Ontario Superior Court's decision to award significant costs while criticizing regulatory conduct establishes an important precedent for how Canadian courts may approach similar cases in the future.
The ruling comes as the Ontario Securities Commission faces increasing pressure to demonstrate both effectiveness and fairness in its regulatory oversight, particularly in rapidly evolving financial technology sectors where traditional regulatory frameworks may struggle to keep pace with innovation.
