GAIN Capital takes Forex trader to Court for taking advantage of order execution error
Gain Capital Group, LLC d/b/a FOREX.COM has filed a complaint against one of its clients – Justin LeBlanc.
The complaint, seen by FX News Group, was filed on May 2, 2023, at the New York Southern District Court.
GAIN seeks to recover ill-gotten trading proceeds of $712,135.90 that the trader allegedly obtained by knowingly and wrongfully exploiting an obvious order execution error on GAIN’s trading platform. GAIN alleges that the defendant was unfairly and unjustly enriched at GAIN’s expense. Defendant’s conduct allegedly amounts to breach of his implied covenant of good faith and fair dealing with GAIN, unjust enrichment and alternatively constitutes a mistake thus requiring disgorgement of the ill-gotten proceeds.
Justin LeBlanc was the account holder of FOREX.com Account No. 10278371. He used GAIN’s online Web Trading platform to place orders and trades for currency on April 1, 2021.
On April 1, 2021, a component of GAIN’s trading system responsible for the execution of resting Limit and Stop orders (“Resting Order Execution Module” or “ROEM”) temporarily lost subscription to the live rate feed for several foreign currency pairs. Because of this issue the Resting Order Execution Module stopped receiving live market prices. Instead, a stale price for several currency pairs became “stuck” in the ROEM.
This meant that in determining whether a customer Limit or Stop orders should be executed, the ROEM checked the order price specified by the customers against a stale, off-market price instead of against the live market price that continued to be published on the trading platform.
In case of Limit orders, such as those placed by LeBlanc, if the order price was “better” than the stale price stuck in ROEM, the order would be executed instantly at the stale price even though the live market price was completely different at the time.
Meanwhile, correct live market rates continued to be published on all FOREX.com trading platforms, including the Web Trading platform used by the Defendant. The order ticket window likewise displayed the correct live market price at all relevant times.
GAIN alleges that the defendant knew of the pricing error and took steps to take advantage of it. He started out by placing an entry Limit order to buy 1,003 USD/CAD at 05:06 AM GMT on April 1, 2021. On the order entry window, Defendant would have seen that the current USD/CAD market price was around 1.2587, which is approximately 18 points higher than his desired entry price of 1.25692. As such, at the time Defendant placed the order, he would have had no expectation that the order would be filled for some time, GAIN says.
His initial Limit order was filled instantly at the price of 1.25685, which was not published on the trading platform for dealing and was even more favorable to him than the order price he specified.
Mere seconds later, Defendant closed this position by manually clicking on the “Close” button in the “Positions” section of the trading interface.
The “Positions” section displays all the pertinent information about the position, including the entry price and the current market price. As such, when Defendant closed the position at the market price of 1.25877 he would have again seen that his Limit order, which only got executed seconds earlier, was filled at a price significantly different from the current market price displayed in the trading interface.
Immediately thereafter, the defendant once again opened the order entry window and placed another entry buy Limit order for 1,003 USD/CAD at the price of 1.25692, and he once again saw that the current market was around 1.2587. Yet despite his specified entry Limit price of 1.25692, the Limit order was again executed instantly at the price of 1.25685 which was not posted for dealing on the platform.
The correct live market prices were clearly obvious to the defendant, GAIN argues. He was logged onto the trading platform and was manually placing orders using an interface which at all times displayed the current market prices at which GAIN was prepared to deal.
Despite this, within a minute, two of his orders were obviously executed at an identical price that was significantly different from the posted market prices approved for dealings on the platform.
Over the next 4 minutes, LeBlanc placed an additional 9 entry Limit orders to buy USD/CAD with a specified price of 1.25692, all of which were instantly executed at the price of 1.25685 because the correct market price posted on the platform continued to be at least 18 points higher.
Instead of ceasing his trading or contacting GAIN to inquire into what was happening, he began to ramp up his order size.
Over the course of approximately 60 minutes, LeBlanc placed a total of 184 entry Limit orders and, ramped up his order, size exponentially from 1,003 USD/CAD to 5,000,000 USD/CAD. Every single one of his entry Limit orders was executed at an identical, erroneous price of 1.25685, which was significantly lower than the live market price he could clearly see on his trading interface each time he manually placed a Limit order and each time he manually closed the resulting position at the correct market price.
At the start of the April 1, 2021 trading session, LeBlanc had a balance of $398.17 in his GAIN account and had averaged around 3 trades per day before April 1, 2021. GAIN claims that by exploiting a manifest error affecting the execution of Limit orders in his account, he amassed $712,135.90 in illegitimate profits after placing 184 trades over the course of a single hour.
Because GAIN was the counterparty to all of these trades, GAIN was harmed in the amount of $712,135.90 as a result of defendant’s allegedly improper trading activity on April 1, 2021.
GAIN requests that the Court find in favor of GAIN and against the defendant providing the following relief:
- Damages in an amount to be proven at trial including but not limited to the $712,135.90 of Ill-Gotten Proceeds, together with interest and any other incidental or consequential damages in an amount to be proven at trial;
- Alternatively, based on the Second Cause of Action, rescission of the Trades and disgorgement of the Ill-Gotten Proceeds,
- Reimbursement of reasonable attorneys’ fees pursuant to the Agreement.
May 3, 2023 @ 12:28 pm
The web trader system is of the Forex Broker (GAIN).. The customer (Le Blanc) invested in the Forex Broker for Trading.. If GAIN says, customer made ill-gotten proceeds, their system helped in the ill-gotten proceeds, otherwise how customer can gain.. Next, the ill-gotten gain and account is created in their system, and settlement to in their hand.. have they not brought to his notice before settlement (i mean, before going to the court)
May 3, 2023 @ 12:57 pm
Well spotted. I see no information in the docket associated with this case that says anything about the contacts (emails, phone calls, etc) between GAIN (FOREX.com) and LeBlanc. What I see is the complaint, a copy of the customer agreement, and heavily edited information about LeBlanc’s client status.
I also believe that taking a matter to the Court is an extreme move. Most such cases are referred to mediation and I expect that this one would follow the same steps.
If the trader responds to the complaint, provided that the documents are not sealed, I’ll make sure to cover his response.