Forex CT fined $20m, CEO disqualified over ‘Wolf of Wall Street’ conduct

A now shut down forex broker has been fined $20m and its boss punished over breaches compared to The Wolf of Wall Street movie.

Forex CT was found to have employed high-pressure sales tactics and made misleading and deceptive representations to clients.

The Federal Court has hit foreign exchange broker Forex Capital Trading with a $20m fine on top of a $400,000 penalty and disqualification imposed on its boss, following a litany of breaches of financial services laws.

The penalties follow a finding that Forex CT engaged in systemic unconscionable conduct, had paid conflicted remuneration to its team leaders and account managers, and failed to act in the best interests of clients.

The court also ordered Forex CT’s CEO and sole director Shlomo Yoshai to pay a $400,000 penalty and disqualified him from managing a corporation for eight years for breaches of his duties.

In March, the Australian Securities and Investments Commission banned Mr Yoshai from offering financial services for 10 years.

In the latest judgment, Judge John Middleton said of Mr Yoshai: “His conduct can be characterised as incompetent and irresponsible, rather than dishonest. His early acceptance of responsibility demonstrates his contrition, and that there is a prospect he will reform.”

Forex CT, now shut down, was found to have failed to comply with financial services laws after being hauled before the courts by ASIC, which once likened its activities to those portrayed in the movie The Wolf of Wall Street.

The foreign exchange trader had offered clients the opportunity to trade in contracts-for-difference and margin foreign exchange accounts.

But it was found to have employed high-pressure sales tactics and made misleading and deceptive representations to clients.

Forex CT was found to have offered incentives to clients to transfer more money to their trading accounts, even after those clients had told account managers they could not afford to invest more.

The court also found it had an employee remuneration scheme and set key performance indicators which rewarded staff based on client net deposits.

Staff at Forex CT would ring a bell or a gong when clients deposited funds of certain amounts into their trading accounts.

Account managers were also encouraged to participate in wheel-of-fortune, roulette tables and dice games to win cash if certain client deposit targets were met.

The judge found Forex CT reaped at least $77.6m in revenue “as the result of the unconscionable system of conduct”.

ASIC had already taken action against four other staff from Forex CT, issuing banning orders against the men in March this year.

The corporate cop had banned Forex CT from operating in May 2020, after complaints in the rapidly-growing retail derivatives space.

The regulator was so concerned it banned then director and CEO of Forex CT Shlomo Tashia for 10 years after financial services compliance breaches.

ASIC commissioner Cathie Armour said the size of the penalty handed down to Forex CT showed the consequences of breaking the law.

“The significant penalty handed down by the court reflects the seriousness of this conduct,” she said.

“If corporations disregard the law and their client obligations, ASIC will take action and the consequences can be severe.”