In May 2025, a US federal court dismissed the US Commodities Futures Trading Commission’s (CFTC) fraud lawsuit against the proprietary trading company My Forex Funds (MFF). At first glance, this may seem like a resounding legal victory (see our previous update on the matter), but a closer analysis reveals a more complex picture.
The court did not address the allegations regarding the illegality of MFF’s conduct, but granted the motion for dismissal due to the CFTC’s own misconduct. Thus, this was merely a technical victory for MMF and it does not negate the impact of the original statement of claim, which exposed vulnerabilities in the proprietary (prop) trading sector and prompted tighter regulatory scrutiny. Therefore, reviewing the statement of claim may provide guidance to companies with regard to regulatory authorities’ stance on desirable and proper business practices.
The Original Statement of Claim: Case Dismissal and Wider Implications
In August 2023, the CFTC alleged MFF had systematically committed a USD 310+ million fraud on more than 135,000 customers. The statement of claim focused on the core business model used by many prop trading companies:
- Deception – MFF presented itself as a partner in customers’ success when, in fact, trading was carried out in a demo environment and the company functioned as a counterparty to the transactions.
- Manipulation – MFF used a dedicated software to create artificial slippage and hidden fees, thereby stacking the odds against customers.
- Payment model tantamount to a Ponzi scheme – Profit payments to customers came from fees paid by other customers and not from actual profitable trading.
The court dismissed the case not because MFF successfully refuted the fraud allegations, but rather due to the CFTC’s procedural misconduct. The CFTC’s procedural misconduct included misrepresentations to the court, primarily by portraying a legitimate multimillion-dollar transfer to the Canadian tax authorities as illicit, while concealing key evidence that proved its legitimacy. In addition to dismissing the lawsuit, the court ordered the CFTC to pay more than USD 3.1 million in litigation expenses.
Despite the dismissal, the original statement of claim remains in force, essentially serving as a roadmap to the public of which business practices are under regulatory scrutiny. Companies that operate using methods similar to MFF are clearly at risk of exposure if their activities come under scrutiny and are considered fraudulent. Moreover, the CFTC’s procedural failures in the MFF case could actually serve to stiffen its determination to prosecute suspicious companies.
New Era of Supervision for the Prop Trading Sector
Despite its dismissal, the MFF lawsuit should send a clear message to the prop trading sector, as both the lawsuit and the allegations raised in it cast a spotlight on the sector’s vulnerabilities. Regulatory authorities in the United States and elsewhere are likely to continue scrutinizing the sector even more closely. Prop trading companies would do well to make any necessary adjustments in advance, by increasing transparency and by ensuring their risk management measures consider potential regulatory amendments.
From past experience, including in the forex industry, once a sector experiences a period of growth and development, regulation inevitably follows. In the interim, various regulatory authorities try to deal with rogue actors using existing law enforcement tools, underscoring the importance of retaining experienced legal advisors.
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Adv. Andrey Yanai is a partner in our firm’s Regulation Department.
Adv. Avihai Tal is an associate in our firm’s Regulation Department.
Barnea Jaffa Lande’s Regulation Department is one of the leading practices in its field in Israel, providing ongoing advice and support to diverse clients from various sectors in Israel and abroad, including companies from the prop trading sector, technology companies, startups, trading platforms, investment funds, and more. Inter alia, the department provides legal advice and assistance for capital raising processes through the issuance of digital currencies (ICO, STO, IEO), and with regard to licensing and regulatory compliance, taxation, data security, and anti-money laundering regulations.