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CFTC Whistleblower Program Paid $100M to Whistleblowers

The CFTC’s Annual Report on the Whistleblower Reward Program and Customer Education Initiatives reveals that whistleblower disclosures have become instrumental in the CFTC’s efforts to protect investors and promote market integrity.  According to the report, the CFTC has paid $100 million to whistleblowers since the inception of the CFTC Whistleblower Reward Program, and enforcement actions associated with those rewards have resulted in sanctions orders totaling more than $800 million.  In FY 2019, the CFTC paid more than $15 million to individuals who voluntarily provided original information or independent analyses that led to successful enforcement actions.

During FY 2019, the CFTC Whistleblower Office received 455 whistleblower tips regarding a wide variety of fraud schemes and violations of the Commodity Exchange Act, including:

  • Bank Secrecy Act violations;

  • failures to register;

  • false reporting;

  • foreign bribery;

  • fraud involving virtual currencies, precious metals, foreign currency exchange, or binary options;

  • inadequate risk controls;

  • insider trading or front-running;

  • money laundering;

  • retaliation against employees; and

  • well as spoofing and other forms of disruptive trading or market manipulation.

CFTC Whistleblower Alerts

The CFTC Whistleblower Office has been very active in promoting its whistleblower reward program and educating the public about CFTC whistleblower rights and protections.  During the reporting period, the Whistleblower Office published alerts on four trending enforcement topics:

  • Bank Secrecy Act violations, including:
    • Improper supervision and records violations
    • Failure to diligently supervise officers’, employees’, and agents’ opening and handling of accounts
    • Failure to protect customers and the markets from fraud and corruption
    • Improper enforcement of trading limits assigned by regulators
    • Inadequate construction of a customer identification program as part of the firm’s compliance program
    • Failure to file suspicious activity reports
  • Insider Trading violations, including:
    • Trading on market-moving information that the source had a duty to protect
    • Brokers front running customer orders or taking the other side of any customer order without consent
    • Tipping or trading using MNPI obtained by virtue of employment
    • Trading on MNPI that was obtained by fraud or deception
    • FCMs or brokers improperly disclosing customer orders or other MNPI
    • Swap dealers or major swap participants improperly disclosing MNPI or using MNPI provided by a counterparty without the counterparty’s consent
  • Foreign Corrupt Practices violations, including:
    • Corrupt practices that alter the prices in commodity markets that drive U.S. derivatives prices
    • Bribes employed to secure business in connection with regulated activities like trading, advising, or dealing in swaps or derivatives, paid out of funds investors believed were being used to invest
    • Corrupt practices used to manipulate benchmarks that serve as the basis for related derivatives contracts, as prices that are the product of corruption might be falsely reported to benchmarks
  • Virtual Currency fraud, including:
    • Price manipulation (like pump-and-dump schemes) involving virtual currencies and other virtual assets
    • Pre-arranged or wash trading of virtual currencies, or swaps or futures contracts based on virtual currencies
    • Virtual currency futures or option contracts or swaps traded on an unregistered domestic platform or facility
    • Certain schemes involving virtual currencies marketed to retail customers by unregistered persons, such as off-exchange leveraged, margined, or financed commodity transactions with persons, even without direct evidence of fraud or manipulation
    • Supervision failures or fraudulent conduct (e.g., creating or reporting fictitious trading) by virtual currency exchanges

Qualifying for a CFTC Whistleblower Reward

Under the CFTC Whistleblower Reward Program, whistleblowers may be eligible for monetary rewards when they voluntarily provide the CFTC with original information about wrongdoing that leads the agency to bring a successful enforcement action resulting in monetary sanctions exceeding $1,000,000.  Whistleblowers are eligible to receive between 10 percent and 30 percent of the monetary sanctions collected.  If represented by counsel, a whistleblower may submit a tip anonymously to the CFTC.

© 2020 Zuckerman Law

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About this Author

Jason Zuckerman, Whistleblower Litigation Attorney, Washington DC  Law Firm
Principal

Described by the National Law Journal as a “leading whistleblower attorney,” Jason Zuckerman litigates whistleblowe r retaliation, whistleblower rewards, wrongful discharge, and other employment-related claims. His practice focuses on representing senior executives and senior professionals in high-...

(202) 262-8959
Matthew Stock, CPA, Auditor, Zuckerman Law Firm
Certified Public Accountant

Matthew Stock is the Director of the Whistleblower Rewards Practice at Zuckerman Law. He is an attorney, Certified Public Accountant, Certified Fraud Examiner and former KPMG external auditor. Mr. Stock has audited a broad range of industries, both domestically and internationally, including large public companies and financial institutions. As an auditor, Mr. Stock developed an expertise in financial statement analysis and fraud recognition.

At Zuckerman Law, Mr. Stock leverages his experience as an attorney, CPA, CFE and external auditor to assist whistleblowers investigate and disclose complex financial frauds to the government. His practice focuses on representing whistleblowers in rewards cases at the SECCFTCDOJ and IRS. In addition, Mr. Stock assists whistleblowers in Sarbanes-Oxley whistleblower retaliation cases, analyzing a wide range of accounting issues, including financial statement fraudinadequate internal controls, and issuer disclosure violations.

202-930-5901