Scam Forex Trader Wants Sh200M Fraud Case Withdrawn From Court

A Nairobi-based forex trader Michael Gitonga who is battling charges of defrauding clients of Ksh 215.3 million now wants the case at lower court withdrawn.

When he appeared before magistrate Benmark Ekhubi,the court was informed that Capital Markets Authority which is a complainant in this case has an investigation department and this matter will be dealt with inhouse.

Magistrate Ekhubi directed parties to file formal applications as he gives other directions.

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.