Forex trader Sh215M fraud case
Gitonga appeared before Magistrate Benmark Ekhubi as the parties discussed the case.
The court heard that the Capital Markets Authority (CMA), which is the complainant, has an investigations department. The parties told the court that CMA could handle the matter internally.
As a result, Magistrate Ekhubi directed the parties to file formal applications. He will then issue further directions.
Gitonga, also known as Tosh, faces allegations of violating CMA regulations. The regulations prohibit licensed money managers from directly handling client funds.
Gitonga accused of misusing client funds
Court documents show that Gitonga allegedly diverted Ksh212.16 million in client funds for personal use.
The alleged offences occurred between April 2022 and August 2024.
In addition, prosecutors accuse Gitonga of fraudulently obtaining Ksh3.14 million from three individuals. They allege that he promised to invest the money on their behalf.
Under Kenya’s online forex trading regulations, money managers can manage client portfolios for a fee. However, they cannot access or withdraw money from client accounts.
Instead, clients must deposit funds into their own trading accounts. They open these accounts through an online foreign exchange broker.
However, prosecutors allege that Gitonga breached these rules. They claim he accessed investor funds and misused the money.
Forex trader faces additional fraud allegations
The charge sheet contains several other allegations against Gitonga.
Between April 2023 and April 2024, he allegedly obtained Ksh1.3 million from Ingotse 95, an investment company. Prosecutors claim he obtained the money through false pretences.
Furthermore, Gitonga allegedly obtained Ksh1.54 million from Chepkembol Labbat between March and April 2024.
He also allegedly obtained Ksh300,000 from James Mwaura Mbugua between March 2022 and September 2024.
In each case, prosecutors allege that Gitonga claimed he would invest the money in forex trading.
CMA suspended Trade Sense Limited licence
The Capital Markets Authority suspended Trade Sense Limited’s licence for 90 days on March 3.
CMA cited governance failures, financial non-compliance and anti-money laundering concerns.
The regulator had already engaged the firm over the alleged breaches since 2023. Therefore, the latest action followed earlier regulatory concerns.
Trade Sense Limited required retail clients to invest at least Ksh258,380 ($2,000). Meanwhile, corporate and high-net-worth investors needed at least Ksh1.2 million ($10,000).
The firm also imposed a 90-day lock-in period for the principal investment. In addition, it charged a three percent management fee, prorated daily.
CMA steps up forex trading oversight
Kenya’s forex market has attracted more investors in recent years. However, the growth has also raised concerns about fraudulent investment schemes.
CMA has licensed non-dealing brokers in Kenya. These brokers provide trading platforms and accounts but do not engage in market-making activities.
Despite these regulations, some traders have allegedly found ways to bypass regulatory requirements. Consequently, some investors have suffered significant financial losses.
The global forex market remains one of the largest and most liquid financial markets. Daily transactions exceed $7.5 trillion.
Meanwhile, Kenya has experienced increased participation from technology-savvy investors. However, concerns about unregulated forex trading prompted CMA to introduce the Online Foreign Exchange Trading Regulations in 2017.
The regulations aim to protect investors and strengthen oversight of the sector.
CMA warns investors against forex fraud
CMA has warned investors against fraudulent traders who promise unusually high or unrealistic returns.
The forex trader Sh215M fraud case involving Gitonga could therefore test enforcement in Kenya’s forex sector.
CMA will use the 90-day suspension period to review Trade Sense Limited’s operations. The regulator will then decide whether to lift or extend the suspension or take further regulatory action.
