An online forex trader was arrested and charged with defrauding his clients a sum of Sh215.3 million. Micheal Gitonga, alias Tosh, is the founder of Trade Sense Limited, a company that had been licensed by the Capital Markets Authority.
His firm’s operating license was suspended by the CMA for 90 days, on March 3rd, citing multiple regulatory breaches that undermined investor protection and market confidence. In Kenya, trading can be done at an individual level or through licensed money managers.
The accused was arraigned in courts of law on Wednesday, March 5th where it was alleged that he had misappropriated Sh212.6 million clients’ money between April 2022 and August 2024.
As per the police charge sheet, he knowingly diverted money intended for foreign exchange trading to his personal use.
Furthermore, he allegedly obtained Sh3.14 million from three separate parties under false promises of investing the money on their behalf in the lucrative yet volatile forex market, thereby misrepresenting his intentions.
The parties are Ingotse 95 from where he allegedly obtained Sh1.3 million between April 2023 and April 2024, Chepkemboi Labbat who gave the firm Sh1.54 million between March 27th and April 12th, 2024 and James Mwaura Mbugua who also lost Sh300,000 between March 2022 and September 2024.
The CMA sought to reduce fraud levels in the forex industry through Kenya’s Online Foreign Exchange Trading Regulations, which were introduced in 2017.
It details that fund managers, through their companies are prohibited from handling client’s funds directly. It further limits their roles to portfolio oversight, offering investment strategies, financial analysis and trade recommendations.
This is in exchange for a fee based on a percentage of assets under management. Trade Sense operated with a lock-in period of 90 days and a 3% daily prorated management fee.
The clients are required to deposit funds into their trading accounts through a licensed online forex broker, who provides the live trading platform and regular statements.
“Micheal Gitonga, on diverse dates between April 28, 2022, and August 29, 2024, being a licensed money manager at Trade Sense Limited, knowingly converted for personal use Sh212.16 million intended for online foreign exchange trading,” read the charge sheet in part.
Over the past decade, more savvy Kenyans have shown interest in the $7.5 trillion-a-day global forex market. The growing demand for forex fund managers has also led to the rise of fraudulent operators promising unrealistic returns.
Trade Sense Ltd’s primary market was retail investors (individuals). The financial firm had two tranches of investors, one being for clients who could manage to raise a minimum investment of Sh258,000 ($2000) and High Networth clients who could raise Sh.1.29 million ($10,000).
The company had been under the Capital Market Authority’s scrutiny for two years prior to its recent suspension. CMA CEO Wyckliffe Shamiah said the suspension was important so as to protect investors and maintain market integrity.
“During the 90-day suspension period, CMA will conduct a review to determine whether to lift the suspension or take further regulatory or enforcement action as may be necessary,” said the authority.
