That really seems like a "No True Scotsman" definition of "sophistication". Regardless, it's not the definition the markets use. For the same reason, I qualify to invest in private company stock by dint of my bank account and annual income, not by passing a test.
Sure, there's the legal and regulatory definition that determines who can invest in a hedge fund or open a trading account or sign an ISDA... But! those are just guidelines that ensure that only people who can afford to get fleeced end up at the table.
The more salient definition is that you're sophisticated if you're able to consistently turn a profit (or just avoid getting ripped off).
In a more perfect regulatory world, these folks wouldn't have been able to make the trade until they were properly educated, but we don't live in that world.
As usual, if you can't spot the idiot at the table, it's probably you.
Nobody who understands the FX market would have chosen to run their execution like that.