Federal Court sets $300.2m penalties in contracts-for-difference case – highest ever for ASIC matter

As the applicant that initiated the proceeding, ASIC alleged that the defendants made many false or misleading representations to customers in contravention of s 12DA or s 12DB of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). 

ASIC asserted that EuropeFX and TradeFred: 

• engaged in unconscionable systems of conduct or patterns of behaviour in their businesses and in unconscionable conduct in customer dealings under s 12CB of the ASIC Act 
• repeatedly gave customers personal advice when not permitted to do so, in breach of s 911A of the Corporations Act 2001 (Cth) 
• lost their customers over $83m 

ASIC claimed that USG – which was liable for EuropeFX’s and TradeFred’s contravening conduct – failed to do everything necessary to ensure that it provided AFSL-covered financial services efficiently, honestly, and fairly under s 912A(1)(a) of the Corporations Act. 

“Over time, customers were pressured to trade more and more money, exposing them to financial losses they could not afford, before being discouraged from lodging or pursuing their complaints,” Court said. 

On 20 December 2024, Justice Michael Wigney of the Federal Court ruled that the defendants engaged in virtually all the contravening conduct alleged by ASIC. ASIC requested the following: 

• declaratory relief and injunctive relief under ss 1101B(1), 1101B(4)(a), and 1324(1) of the Corporations Act, as well as s 12GD(1) of the ASIC Act 
• non-party redress orders under ss 12GNB and 12GNC of the ASIC Act 
• pecuniary penalties under ss 12GBA(1) and 12GBB(3) of the ASIC Act and s 1317G(1) of the Corporations Act 

USG and TradeFred were being wound up in insolvency. Regarding EuropeFX, ASIC recommended pecuniary penalties amounting to $114.1m. Arguing that the amount was excessive, EuropeFX suggested pecuniary penalties of around $40m. 

$300.2m in penalties

Justice Wigney of the Federal Court of Australia found it appropriate to issue ASIC’s requested declarations and orders against the defendants. Wigney ordered USG, EuropeFX, and TradeFred to pay the Commonwealth pecuniary penalties totalling $300.2m. 

In ASIC’s media release, Sarah Court highlighted that these penalties, which were the highest ever awarded for an ASIC matter, promoted deterrence. 

“These record penalties reflect the egregious nature of CFD issuer misconduct in this case,” she said. 

Regarding EuropeFX’s pecuniary penalties, Wigney explained that very substantial pecuniary penalties would help deter EuropeFX and similar entities from future contraventions. 

Wigney determined that EuropeFX systematically exploited many vulnerable, financially naive, and gullible customers for its own financial gain. Wigney described EuropeFX’s contraventions as clearly egregious, deliberate, and flagrant.