How Insiders can Report Virtual Currency Fraud to Receive CFTC Awards

November 15, 2023
How Insiders can Report Virtual Currency Fraud to Receive CFTC Awards

The Commodity Futures Trading Commission (CFTC) is proactively reaching out to insiders who have detailed information about how companies manipulate cryptocurrency pricing or those that have issued fraudulent White Papers for cryptocurrencies and/or other systemic schemes from the cryptocurrency itself and/or the platform for holding the virtual currency.  A white paper is a detailed authoritative document that provides information about a particular cryptocurrency project and/or blockchain platform. White papers try to explain the technology, its purpose, features, and how it works. They serve as a foundational document that outlines the project’s goals, technical specifications, and often its economic model including the quantity of tokens or currency that will be made available and how it becomes available and who will benefit and how much from the ICO (initial coin offering).  Both the CFTC and the SEC whistleblower program are jostling for jurisdiction over these matters depending on how the ICO is made, so an astute CFTC whistleblower lawyer will also prophylactically file an SEC cryptocurrency whistleblower complaint and vice versa.

There’s plenty of unfortunate scams out there that involve cryptocurrencies, but the CFTC is looking for individuals with detailed insider information to blow the whistle.  White paper lies can include, but are not limited to the extent of the coin offering, the profiting from the designers of the coin, the extent of the coins available and much more. Often with tens, if not hundreds of millions in play, the key to these schemes is to blow the whistle early while the bad actors still have the money to cease.  

Other major things to be on the lookout are the manipulation of cryptocurrency pricing. Some of these schemes occur when investors or companies pose as market makers and put a false buy or sell of large quantity so other purchasers build their trading strategies ahead of the big orders and the big orders never are executed and further the maker in these schemes is generally putting a huge buy order while they’re selling to inflate the pricing action. For example, using Bitcoin as an example.  If a market maker puts a billion dollar buy order on $25,000, other traders will coalesce around that price and start to put buy orders around $25,100 and $25,200 and other steps  believing there is strong support at $25,000.  Meanwhile the same theoretical buyer at $25,000 may be selling into the action and functionally selling, but the minute the $25,000 is hit, they pull the massive buy order imploding the price down a few steps.  Market manipulation is a big no no and the CFTC and the SEC are looking to make examples of that type of conduct.

Additionally, Ponzi Schemes are ever-present with the Sam-Bankman Fried’s FTX massive fraud and Celisius’s ripping off all their depositors as well, so certain cryptocurrency brokers who are using the deposits for non-disclosed purposes and don’t have sufficient reserves to pay out the monies or cryptocurrency on demand may be engaging is massive crypto ponzi schemes and it’s expected that more of these will become unearthed through implosion or through whistleblowers.

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Understanding Virtual Currency

In order to effectively combat virtual currency fraud, it’s crucial to grasp what constitutes a virtual currency. According to the Internal Revenue Service, virtual currencies, such as Bitcoin, are defined as digital representations of value that serve as mediums of exchange, units of account, and stores of value. Importantly, these virtual currencies are recognized as commodities under the Commodity Exchange Act (CEA). This means that when virtual currencies are incorporated into derivatives contracts or are subject to fraudulent or manipulative activities within interstate commerce, the CFTC’s regulatory authority comes into play.

Identifying Misconduct

Being vigilant against various forms of misconduct in the virtual currency space is paramount. The CFTC has taken legal action against both companies and individuals involved in deceitful investment solicitations related to virtual currencies. Some of the specific concerns and misconduct to be watchful for include:

  1. Price Manipulation: This involves fraudulent schemes, such as pump-and-dump tactics, aimed at artificially inflating the prices of virtual currencies and other digital assets.
  2. Pre-Arranged or Wash Trading: Keep an eye out for activities like wash trading in virtual currencies or the trading of swaps and futures contracts based on virtual currencies. These activities can be indicative of market manipulation.
  3. Unregistered Domestic Platforms: Examine the legitimacy of virtual currency futures, option contracts, or swaps traded on platforms that are not registered with the CFTC. This unregistered activity often poses a heightened risk.
  4. Schemes Targeting Retail Customers: Be cautious of schemes that promote virtual currencies to retail customers by unregistered entities. This includes off-exchange leveraged, margined, or financed commodity transactions. Even in the absence of clear evidence of fraud or manipulation, such activities warrant scrutiny.
  5. Exchange Supervision Failures: Instances of fraudulent conduct, such as the creation or reporting of fictitious trading activity, by virtual currency exchanges should not be ignored. Ensuring the integrity of these platforms is vital to maintaining a healthy virtual currency market.

Reporting CFTC Fraud

Reporting virtual currency fraud to a CFTC whistleblower law firm is a critical step in protecting the integrity of the financial markets and holding wrongdoers accountable. You should speak with a CFTC whistleblower law firm.

Upon contacting the law firm and scheduling an initial consultation, you’ll have the opportunity to discuss your case confidentially. This conversation will help you evaluate the firm’s experience, and commitment to whistleblower protection. If you choose to proceed with them, the law firm will guide you through the process of preparing a whistleblower submission to the CFTC. They will also take measures to ensure your identity remains confidential and assist you in navigating potential financial rewards if your information leads to successful enforcement actions. Throughout the journey, your chosen law firm will be your advocate, working diligently to bring those responsible for virtual currency fraud to justice while safeguarding your rights and security.

CFTC Whistleblower Award

Whistleblowers play a crucial role in maintaining the integrity of financial markets, and their contributions are recognized and rewarded through a structured incentive program. Under the CFTC program, CFTC whistleblowers are eligible to receive financial awards amounting to a substantial percentage, typically falling within the range of 10 to 30%, of the monetary sanctions collected as a result of their disclosures as a CFTC whistleblower reward. This financial incentive serves as a powerful motivator for individuals to come forward with valuable information about fraudulent activities and market manipulations.  By remaining vigilant and informed about these potential forms of misconduct, individuals can play a pivotal role in protecting the virtual currency landscape and become eligible for financial rewards and legal protections through a CFTC whistleblower law firm.