https://fxnewsgroup.com/forex-news/...or-taking-advantage-of-order-execution-error/ 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.
This forex trader is super alert and simply outstanding and has all the qualities of a day trader. He is always on the lookout for trading opportunities. Great risk management/position sizing! Keep it up !!!!
Well first of all, thanks for admitting and proving to us the traders now definitely that Gain Capital trade against us and not risk-neutral at all because if they were risk-neutral, they wouldn't have cared if this observant trader allegedly took advantage of a supposed platform problem which somehow displayed "wrong" price information to earn profit which is the whole purpose of trading. Secondly, Gain Capital doesn't have any shred of proof that this trader actually took advantage of this "erroneous price" displayed by the system. All the evidence that they had was "well he traded more than usual" which is lame. LOL The legal concept of modus operandi should not apply here as us traders' trading strategy and trading plans are dynamic and change from day to day according to variety of factors including market condition, increased capital, change in trading style or intention like revenge trading and etc. Maybe this trader was revenge trading because he was losing too much money before. How can Gain Capital prove that he increased his trading size because he wanted to somehow take advantage of this "wrong price"? LOL Thirdly, even assuming that this trader increased his trading to really took advantage of this "wrong" price on the platform, this trade was well within his rights to do so. Since retail forex is traded OTC and not on a centralized exchange, every single broker is free to provide its own quote on any forex instrument at any time and there is really no established "market" price. Every single price that the broker posts on the platform is considered the correct price for trading. So how would the trader or anybody know which price is the "correct" price and which price is the "wrong" price? To that trader and to any trader, a price is a price and he simply saw a price discrepancy and he profited from it by arbitraging the price discrepancy between the two systems. How was this trader Justin Leblanc to know that this particular price discrepancy on the platform was supposed to be a "wrong" price? All he saw was a price discrepancy which presented arbitrage opportunities. Why should he refrain from trading perfectly good arbitrage opportunities? Arbitraging is a legal and accepted trading practice and is carried out by traders throughout history and all around the world. So now they all have to cough up the money just because the counterparty lost money? LOL If I were the judge, it's case dismissed in an instant. Gain Capital has absolutely no case here. Justin Leblanc earned his profit fair and square. Gain Capital, a broker that trades against its clients should just shove it and not be a sore loser.
They are behaving like a casino who doesn't want to pay up. Only they can win at our expense but not the other way around. When we win, then it's bloody murder because according to what they have set up, we are supposed to lose and lose all the time. LOL If they insist this is "ill-gotten gains", I were the judge and/or the lawyer for Justin Leblanc (I hope he finds a good lawyer for himself), I would question Gain Capital to ask them WHY do they think it's so unusual that this trader has earned this amount of profit. After all, isn't that what they have always advertised to lure us in? The forex market being a several trillion dollar market so you can make hundreds of K's of profit with the sky being the limit. Well this is what this trader did, why is it all of sudden "ill-gotten gains"? LOL And then I would make them officially publish % of the accounts that are actually profitable and their daily profit/loss amount so we will know how much money exactly we can make from them and really how profitable it is for us to trade with them. And we can judge for ourselves whether we really want to trade with them. No point in playing a slot or a table that doesn't pay up since they are operating like a casino here.
Here is the legal argument. Account agreement: https://www.forex.com/~/media/forex/files/support/account-forms/agreement-v30-13-20211025.pdf Definition of gross negligence: https://www.law.cornell.edu/wex/gross_negligence Clearly, GAIN did not plan for their industry standard software to allow this to happen, and , so it's not gross negligence. So, according to the account agreement, GAIN (aka FOREX.com) is not responsible for any losses. Therefore, by process of elimination, the customer is then responsible for GAIN's losses.
Maybe some stuff at Gain cannot afford to loose their jobs as they live from paycheck to paycheck. If they loose on court they will certainly get more attention and no jobs nowhere, so we can already welcome our latest Elitetrader members THEN when they are seeking a "new career" as traders.
EXACTLY! So if they are not responsible for any losses from their crappy platform then they shouldn't complain either when we actually made some profit from their crappy platform. They should be happy that for all those times that their crappy platform caused us losses, we weren't suing them.
The broker's disclaimer "your screwed if it's a technical problem - you losses, not ours" When the error is in the favor of the customer the tune sure changes. Who knows how many customer's got screwed with their 'stale quotes'. This could backfire on Gain in court & cost them a lot more.
The "trader" is going to lose. He clearly knew that the figure he executed was concurrently 25 pips off his closing ticket. A dude with $400 exploiting a system error and trading 50 lots inside an hour. I am simply curious whether he was able to wire out (doubtful). I was sued (as was Putnam at TerraNova) during the COMS crossed-quote arb (RAES arb) in 2000-2001. The OCC filed suit (dropped) and that was inter-exchange. That was a legitimate exchange arb.