Thursday, March 6, 2025 - A Nairobi-based forex trader Michael Gitonga is battling charges of defrauding clients of Ksh 215.3 million, compounding his recent legal troubles following the suspension of his firm, Trade Sense Limited by the Capital Markets Authority.
The charges come amid concerns over regulatory violations in
Kenya’s online forex trading sector, where unregulated brokers and rogue
traders have taken advantage of investors.
Gitonga, who is also known as Tosh, is accused of
contravening CMA regulations by directly handling client funds, an act
prohibited for licensed money managers.
Court documents indicate that between April 2022 and August
2024, he allegedly diverted Ksh 212.16 million of clients’ money for personal
use.
He is also accused of fraudulently obtaining an additional
Ksh 3.14 million from three individuals after falsely claiming he would invest
the money on their behalf.
According to Kenya’s online forex trading regulations, a
money manager is only allowed to oversee a client’s portfolio in return for a
fee but cannot access or withdraw client funds.
Clients are required to deposit funds into their own trading
accounts, which they open through an online foreign exchange broker.
However, Gitonga allegedly flouted these rules, accessing
investor funds and misusing them.
Additional details from the charge sheet show that between
April 2023 and April 2024, Gitonga allegedly obtained Ksh 1.3 million from an
investment company, Ingotse 95, under false pretenses.
He is also accused of fraudulently acquiring Ksh 1.54
million from Chepkembol Labbat between March and April 2024 and Ksh 300,000
from James Mwaura Mbugua between March 2022 and September 2024, all while
claiming the money would be invested in forex trading.
The CMA, which suspended Trade Sense Limited’s licence for
90 days on March 3, cited governance failures, financial non-compliance, and
anti-money laundering concerns as reasons for its decision.
The regulator had been engaging the firm over these breaches
since 2023, indicating that Gitonga had been on its radar for some time.
Trade Sense Limited required a minimum investment of Ksh
258,380 ($2,000) for retail clients and Ksh 1.2 million ($10,000) for corporate
and high-net-worth investors.
The firm also imposed a 90-day lock-in period for the
principal investment and charged a three percent management fee, prorated
daily.
Kenya’s forex trading market has witnessed a rise in fraudulent schemes as more investors seek to capitalise on the lucrative but high-risk sector.
CMA has only licensed non-dealing brokers, meaning they do
not engage in market-making activities but only provide trading platforms and
accounts.
However, some traders have found ways to bypass regulations,
resulting in significant investor losses.
The forex market is one of the largest and most liquid in
the world, with daily transactions exceeding $7.5 trillion.
Kenya has seen a surge in participation from tech-savvy
investors but the risks associated with unregulated forex trading prompted the
CMA to introduce the Online Foreign Exchange Trading Regulations in 2017 to
safeguard investors.
The CMA has warned against fraudulent traders who lure
investors with promises of high, unrealistic returns.
Gitonga’s case now serves as a major test for enforcement in
the sector, with regulators keen to clamp down on violators.
CMA will use the 90-day suspension period to review whether
to lift or extend Trade Sense Limited’s suspension or to take further
regulatory action.
The Kenyan DAILY POST
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