1:400 Forex Leverage Claim: Court of Cassation 2024/9133

After nine months of leveraged trading, an investor's account loses USD 300,825.08. According to the investor, the cause was not his own positions but the broker's software infrastructure: leverage that should have been 1:100 under the contract rose to as much as 1:400 through the system. The broker says the investor was experienced, that all disclosures were made in full and that the loss came from his own investment decisions. The courts discussed what must be proven before a loss can be placed on a broker in such a situation.

In its decision of 17 December 2024, Docket No. (E.) 2024/1095, Decision No. (K.) 2024/9133, the Court of Cassation 11th Civil Chamber unanimously upheld the Regional Court of Appeal decision that had rejected on the merits the appeal against the first-instance judgment dismissing a damages claim based on excessive leverage in forex trading.

⚖️ The Framework of the Dispute

On 18.04.2013 the claimant investor opened an account with the defendant broker by signing a Framework Agreement for Leveraged Trading Transactions. A Customer Identification Form, a Risk Disclosure Form and an agreement on online trading were drawn up together with it. The period in dispute runs from 18.04.2013 to 22.01.2014, and the amount the investor claimed to have lost in that period is USD 300,825.08.

The case was heard by the Istanbul 1st Consumer Court. In the operative part of the Court of Cassation decision it is also noted that cases brought by consumers in consumer courts are exempt from court fees, so no fee was charged to the claimant. The Court of Cassation described the dispute as "recovery of a loss arising from excessive leverage in leveraged transactions on the forex market".

🗂️ The Violations Alleged by the Investor

The statement of claim objected not only to the leverage ratio but also to the broker's pricing and margin system. The allegations can be summarised as follows:

🛡️ The Broker's Defence

The defendant broker argued that the necessary disclosures had been made to the investor, that the investor had stated he had previously invested in leveraged products and was experienced. It further argued that the software used was a widely used infrastructure system, that the allegation that pending orders were cancelled irregularly did not reflect the truth, that no investment advice had been given to the investor, that it was subject to supervision by the Capital Markets Board (SPK) and that there was no practice in breach of the contract.

🏢 The Consumer Court's Assessment

The first-instance court dismissed the claim. The main findings in its decision were as follows:

🌐 The Market Maker Debate and the Appeal

The Istanbul Regional Court of Appeal 43rd Civil Chamber examined in detail the investor's objection that "the broker was not in fact a market maker". According to the chamber, international banks form prices as market makers in currency pairs and in spot commodities such as gold and silver; these prices are transmitted through networks to forex brokers, and the brokers add their own revenue and present the price to the investor. The fact that the broker has no control over these prices does not affect its status as a market maker within the meaning of Article 2/a of the relevant Communiqué.

Relying on the expert assessment, the chamber also accepted that the loss resulted from the investor conducting his forex trades with a futures-trading logic and habit, opening opposing buy and sell positions and continuing to take excessive risk. Accordingly, a causal link was not proven between the broker being an agent or a market maker and the alleged loss, and the appeal was rejected on the merits under Article 353/1-b-1 of the Code of Civil Procedure (HMK).

📌 The Court of Cassation's Decision to Uphold

In its review under Articles 353, 369, 370 and 371 of the HMK, the Court of Cassation 11th Civil Chamber stated that the first-instance decision contained no error and that the decision rejecting the appeal on the merits complied with procedure and law. The claimant's objections on appeal were rejected and the Regional Court of Appeal decision was upheld under Article 370/1 of the HMK. The decision was given on 17.12.2024, as final and unanimously.

The chamber did not formulate a separate statement of principle; it regarded the lower courts' assessment of the evidence as sufficient. The weight of the decision therefore lies in the findings on proof and causation set out in the first-instance and appeal reasoning.

🔍 Consequences for Proof and Causation

The decision shows that in damages claims against a broker, however detailed the technical content of the allegation, the outcome depends on a concrete violation supported by documents and on that violation being linked to the loss. The main points arising from the case are:

A similar debate on account closure, together with objections about the stop-out level and spreads, is examined in our article Stop-out and spread in forexTR, while transactions unsuitable for the investor's profile are covered in our article the suitability test in forexTR.

🧩 Administrative Sanction Versus Damages Claim

The leverage ratio is also a subject in the SPK's administrative supervision. The administrative fine imposed on a broker for raising the leverage ratio on the basis of email approval is discussed in our article on the Council of State 13th Chamber decision 2024/5152TR. In that case the issue is whether the broker complied with the regulations.

In the case examined by the Court of Cassation 11th Civil Chamber, the question is different: through which concrete act of the broker and through which causal link can the loss in the investor's account be explained? The existence of an administrative violation does not by itself lead to a damages award; it must also be shown that the loss arose from that violation. In this case, the fact that the SPK review found no violation and that the expert report attributed the loss to trading strategy led to the dismissal of the claim.

A note on procedure should also be added: the case was filed in 2019. Under Article 73/A, added to Law No. 6502 by Law No. 7251, in disputes heard by consumer courts today, applying to a mediator before filing the case is, apart from the exceptions in that article, a condition for bringing the case. The provision of Article 73/2 that cases brought by consumers in consumer courts are exempt from court fees was applied in the decision as well.

❓ Frequently Asked Questions

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