Commodity Futures Trading Commission (CFTC) Commissioner Caroline D. Pham bravely shared her statement following the Sanctions Motion filed by My Forex Funds (MFF), expressing her deep disappointment with the blatant misrepresentations of facts made by CFTC staff members in court, but she was “not surprised”.
Her comments last week highlighted the actions of the regulatory agency in a specific case against MFF and its CEO, Murtuza Kazmi. The timing of the criticisms was also interesting as the court is about to rule whether to impose sanctions against the CFTC, as requested by the prop trading firm.
Unethical Conduct by a Government Agency
Every once in a while, defence attorneys representing clients in enforcement proceedings encounter unethical conduct from lawyers representing governmental agencies. This happens in the United States and in other countries, and it is always very disappointing and concerning. However, it is not often that a defendant and their lawyers decide to proceed with a sanctions motion.
Enforcement proceedings are always a significant challenge, and further annoying the government by filing a sanctions motion is not a move that most defendants are willing to make. This is even more true for the defence bar.
The lawyers are typically “Repeat Players”, who have ongoing relationships with the government lawyers and will typically be unwilling to jeopardize that relationship for any specific matter. This is why the motion filed by MFF is especially important. It reveals how counsel for MFF tried to get the CFTC enforcement staff to correct their misrepresentations of facts and unethical conduct, but encountered a clinical and condescending response, with zero accountability. Unfortunately, this too will not come as a surprise to defence attorneys, who every once in a while run into similar situations.
Government Lawyers Put Agency’s Integrity at Stake
Enforcement agencies hold a great amount of power, and as Uncle Ben told young Peter Parker: “With great power comes great responsibility.” That means the government lawyers cannot afford to slip, and cannot be allowed any wiggle room when it comes to their integrity. Mainly, because it is not their own integrity that is at stake, but rather the integrity of the governmental agency they represent and of the sovereign it is a part of.
For this reason, the motion is so important. It triggered Commissioner Pham’s statement, who reiterated the importance of integrity and ethical conduct by government lawyers, and urged an agency response that strives to meet even partially the standards of internal investigations and internal audits that the CFTC demands of its supervised entities. Things shouldn’t have come to this.
The CFTC enforcement division should have taken these allegations more seriously, and proactively taken responsibility for cleaning up intentional misrepresentations of facts. It didn’t, and now it needs to answer to the court.
Courts typically favour the government, but in this case, the court must hold the CFTC accountable for its wrongdoing. Especially in enforcement cases, the judicial system has to be perceived as fair, and when the enforcement agency doesn’t play fairly in one case, it creates a huge dent in the public’s trust in the enforcement agency across the board. Commissioner Pham’s statement is an important step in the right direction, which the CFTC enforcement division must continue.
The Impact on MFF’s Ongoing Case
Another interesting question is how this fiasco will impact the legal proceedings against MFF.
From a formal legal point of view, these alleged misrepresentations of facts were made by CFTC staff in its attempt to obtain a restraining order against the defendants in the MFF case. This is a separate proceeding, with a very specific objective (freezing assets), that theoretically does not address the many questions of law and fact that will be addressed in the main proceedings.
That being said, the CFTC lost a very important element that plays a crucial role in every enforcement action – credibility. The new CFTC legal team will undoubtedly have to fight the case with a big shadow looming over them. It is difficult to gauge exactly how this new situation will impact the proceedings, but people don’t like to be lied to and have a hard time forgetting when someone tried to deceive them.
Commodity Futures Trading Commission (CFTC) Commissioner Caroline D. Pham bravely shared her statement following the Sanctions Motion filed by My Forex Funds (MFF), expressing her deep disappointment with the blatant misrepresentations of facts made by CFTC staff members in court, but she was “not surprised”.
Her comments last week highlighted the actions of the regulatory agency in a specific case against MFF and its CEO, Murtuza Kazmi. The timing of the criticisms was also interesting as the court is about to rule whether to impose sanctions against the CFTC, as requested by the prop trading firm.
Unethical Conduct by a Government Agency
Every once in a while, defence attorneys representing clients in enforcement proceedings encounter unethical conduct from lawyers representing governmental agencies. This happens in the United States and in other countries, and it is always very disappointing and concerning. However, it is not often that a defendant and their lawyers decide to proceed with a sanctions motion.
Enforcement proceedings are always a significant challenge, and further annoying the government by filing a sanctions motion is not a move that most defendants are willing to make. This is even more true for the defence bar.
The lawyers are typically “Repeat Players”, who have ongoing relationships with the government lawyers and will typically be unwilling to jeopardize that relationship for any specific matter. This is why the motion filed by MFF is especially important. It reveals how counsel for MFF tried to get the CFTC enforcement staff to correct their misrepresentations of facts and unethical conduct, but encountered a clinical and condescending response, with zero accountability. Unfortunately, this too will not come as a surprise to defence attorneys, who every once in a while run into similar situations.
Government Lawyers Put Agency’s Integrity at Stake
Enforcement agencies hold a great amount of power, and as Uncle Ben told young Peter Parker: “With great power comes great responsibility.” That means the government lawyers cannot afford to slip, and cannot be allowed any wiggle room when it comes to their integrity. Mainly, because it is not their own integrity that is at stake, but rather the integrity of the governmental agency they represent and of the sovereign it is a part of.
For this reason, the motion is so important. It triggered Commissioner Pham’s statement, who reiterated the importance of integrity and ethical conduct by government lawyers, and urged an agency response that strives to meet even partially the standards of internal investigations and internal audits that the CFTC demands of its supervised entities. Things shouldn’t have come to this.
The CFTC enforcement division should have taken these allegations more seriously, and proactively taken responsibility for cleaning up intentional misrepresentations of facts. It didn’t, and now it needs to answer to the court.
Courts typically favour the government, but in this case, the court must hold the CFTC accountable for its wrongdoing. Especially in enforcement cases, the judicial system has to be perceived as fair, and when the enforcement agency doesn’t play fairly in one case, it creates a huge dent in the public’s trust in the enforcement agency across the board. Commissioner Pham’s statement is an important step in the right direction, which the CFTC enforcement division must continue.
The Impact on MFF’s Ongoing Case
Another interesting question is how this fiasco will impact the legal proceedings against MFF.
From a formal legal point of view, these alleged misrepresentations of facts were made by CFTC staff in its attempt to obtain a restraining order against the defendants in the MFF case. This is a separate proceeding, with a very specific objective (freezing assets), that theoretically does not address the many questions of law and fact that will be addressed in the main proceedings.
That being said, the CFTC lost a very important element that plays a crucial role in every enforcement action – credibility. The new CFTC legal team will undoubtedly have to fight the case with a big shadow looming over them. It is difficult to gauge exactly how this new situation will impact the proceedings, but people don’t like to be lied to and have a hard time forgetting when someone tried to deceive them.
This post is originally published on FINANCEMAGNATES.
