Kenya Insights

Tag: CMA

  • How Forex Trader ‘Tosh’ Defrauded Clients Of Sh215M

    How Forex Trader ‘Tosh’ Defrauded Clients Of Sh215M

    Michael Gitonga, alias Tosh, a prominent Nairobi-based forex trader and founder of Trade Sense Limited, has been charged with defrauding clients of Sh215.3 million, marking a dramatic fall from grace for the once-licensed money manager.

    The allegations come just days after the Capital Markets Authority (CMA) suspended Trade Sense’s operating licence for 90 days on March 3, citing multiple regulatory breaches that undermined investor protection and market confidence.

    Gitonga was arraigned in court on Wednesday, facing accusations of misappropriating Sh212.16 million in client funds between April 2022 and August 2024. The charge sheet alleges that, as a licensed money manager, he knowingly diverted these funds—intended for online foreign exchange trading—for his personal use.

    Additionally, he is accused of obtaining Sh3.14 million from three separate parties under false pretenses, promising to invest their money in forex trading on their behalf.

    The charges detail specific instances of deceit: between April 2023 and April 2024, Gitonga allegedly obtained Sh1.3 million from Ingotse 95, an investment company; Sh1.54 million from Chepkemboi Labbat between March 27 and April 12, 2024; and Sh300,000 from James Mwaura Mbugua between March 2022 and September 2024.

    In each case, he is said to have misrepresented his intentions, claiming the funds would be invested in the lucrative but volatile forex market.

    A Breach of Trust and Regulation

    Under Kenya’s Online Foreign Exchange Trading Regulations, introduced by the CMA in 2017 to curb fraud in the fast-growing sector, money managers like Gitonga are strictly prohibited from handling clients’ funds directly.

    Their role is limited to overseeing portfolios—offering investment strategies, financial analysis, and trade recommendations—in exchange for a fee based on a percentage of assets under management.

    Clients are required to deposit funds into their own trading accounts through a licensed online forex broker, who provides the trading platform and regular statements.

    “Michael Gitonga, on diverse dates between April 28, 2022, and August 29, 2024, being a licensed money manager at Trade Sense Limited, knowingly converted for your personal use Sh212.16 million intended for online foreign exchange trading,” the charge sheet reads, highlighting a blatant violation of these rules.

    The CMA’s decision to license only non-dealing brokers—who provide platforms and accounts but do not execute trades or access client funds—reflects the high-risk nature of forex trading, which demands robust safeguards.

    Kenya’s tech-savvy population has increasingly tapped into the $7.5 trillion-a-day global forex market over the past decade, fueling demand but also attracting rogue operators promising unrealistic returns.

    Trade Sense’s Downfall

    Trade Sense Limited, which targeted retail investors with a minimum investment of Sh258,380 ($2,000) and high-net-worth clients with Sh1.2 million ($10,000), had been under CMA scrutiny for two years before its licence suspension.

    The regulator cited failures in governance, financial fidelity, anti-money laundering compliance, and operational standards.

    On Monday, CMA Chief Executive Wyckliffe Shamiah emphasized that the suspension was a necessary step 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,” the authority stated. The move follows a surge in forex-related fraud cases, which prompted the 2017 regulations aimed at reining in unregulated entities.

    Gitonga’s case highlights the dangers of Kenya’s rapidly expanding online forex trading industry, where legitimate opportunities coexist with predatory schemes.

    The CMA, established in 1989 under the Capital Markets Act, has worked to foster an orderly and efficient market, but rogue traders continue to exploit gaps.

    Trade Sense’s lock-in period of 90 days and a 3% daily-prorated management fee had lured investors, only for many to now face significant losses.

    As the case progresses, investors and regulators alike will be watching closely to see whether Gitonga faces further legal consequences. The CMA, meanwhile, continues to stress the importance of investor education and stringent oversight to safeguard Kenya’s forex trading industry from fraudsters.

    For now, clients of Trade Sense Limited can only wait and hope for justice as the regulator works to restore confidence in the country’s forex markets.

  • CBK To Crackdown Unlicensed Online Forex Dealers

    CBK To Crackdown Unlicensed Online Forex Dealers

    Central Bank of Kenya Chair Patrick Njoroge has warned Kenyans from conducting business with the unlicensed and unregulated online forex dealers who, according to the Institution, are planning a massive swindling scheme.

    According to CBK, the now increased online forex dealings are conducted by a web of fraudsters who, if not regulated as soon as now, many Kenyans who have enrolled in the business risk being conned.

    “The attention of CBK has been drawn to the unlicensed and unregulated online forex dealers and platforms that put Kenyans at risk of losing their money,” said CBK.

    CBK through its chair has advised Kenyan to always double-check the licensing status of the online forex dealers from the CBK websites to confirm authenticity.

    CBK states that some of the characteristics of these unregulated fraudster dealers and platforms include, purporting to offer the best forex deals in the market, lack requisite licenses issued by CBK or Capital Markets Authority, inadequate anti-money laundering and consumer protection safeguards.

    “The platforms are downloadable on Google Play and Apple App store, and aggressively market themselves through social media and mass emails,” CBK further stated.

    In the event where some have already been defrauded of their cash, CBK officials said that the victims, if any already, should report their case to CBK through the Banking Fraud Investigations Unit.

    CMA Chief Executive Paul Muthaura In October 2018, said he observed several individuals and entities carrying on or purporting to carry on the business of an online foreign exchange broker or a money manager without the relevant license by the Authority.

    “The Capital Markets Authority (CMA) has issued only one license to EGM Securities Limited) to operate as a Non – Dealing Online Foreign Exchange Broker,” Muthaura said in a statement.

    CMA has assured those in the forex business that the Authority will take necessary measure and appropriate action against any persons illegally conducting online foreign exchange trade.

  • Deputy Chief Justice Philomena Mwilu Closed Irregular Property Deals Worth Sh315M On The Back Of Imperial Bank’s Collapse

    Deputy Chief Justice Philomena Mwilu Closed Irregular Property Deals Worth Sh315M On The Back Of Imperial Bank’s Collapse

    There are new mega revelations in a petition to sack Kenya’s second senior most Judge.

    Deputy Chief Justice Philomena Mwilu closed irregular property deals worth Sh315 million with the collapsed Imperial Bank.

    Justice Mwilu secured all these multimillion loan dealings just 3 months before Imperial Bank was put on receivership.

    Imperial Bank was placed under receivership in October 2015, after its board alerted Capital Markets Authorities of suspected malpractices.

    She acquired Properties through backdoor deals that have now been linked to tax evasion by DPP’s prosecution team.

    The embattled DCJ, Mwilu, sold the three parcels of land for Sh315 million, in fictitious deal made between March 2016 and July 2016.

    According to DPP, Justice Mwilu backdoor property deals doubled her returns from Sh155 loan from Imperial Bank to sh 315million.

    Our sources working under DPP revealed to us that Justice Mwilu did not pay capital gains tax on the return of the land.

    She also failed to pay stamp duty of four per cent on value of the land she had bought via Imperial Bank between December 2014 and March 2016 for Sh160 million.

    According to DPP investigators, Justice Mwilu’s Sh132 million loans were granted interest free without written applications.

    Justice Mwilu did not appraise her creditworthiness for interest free loans that were granted using letters with Judiciary letters head.

    According to evidence in DPP’s possession, Justice Mwilu also fraudulent recovered securities of the said loans and sold them at a profit that directly led to losses of Sh60 million at the collapsed Imperial Bank.

    This is has been proven without doubt that Mwilu used her position at the Judicial office to improperly enrich herself.

    Justice Mwilu bought two plots in Nairobi for Sh80 million in December 2014.

    1. Plot ref number 3734/202

    2. Plot ref number 3734/209

    Mwilu later on used the two properties as security for a Sh60 million long-term loan.

    It has also been revealed that Justice Mwilu took another short-term loan of Sh60 million for purchase of half-acre property registered under 3734/1129.

    She successfully used it as substitution of the earlier loan security, leading to release of her two plots.

    According to DPP, Justice Mwilu sold all the properties for Sh315 million. She only cleared the Sh65 million and failed to offer Imperial Bank property 3734/1129 as security.

    “The respondent clearly had no intention of charging the said property to Imperial and thus obtained said securities by making false representations,” reads DPP’s statement.

    This is coming at a time when three appellate Judges had just overturned a decision of the High Court barring the CMA from investigating circumstances under which Imperial Bank proceeded with a bond despite insider knowledge it was at the collapsing edge.

    Justices Erastus Githinji, Daniel Musinga and Otieno Odek ruled that CMA is empowered to investigate and take enforcement actions against liable Imperial Bank Directors.

    Imperial Bank directors in question and now being pursued are Alnashir Popat, Omurembe Iyadi, Jinit Shah, Anwar Hajee, Hanif Somji and three others junior members.