Understanding the CFTC Whistleblower Program: Protections, Rewards, and Eligibility Criteria
The Commodity Futures Trading Commission (CFTC) Whistleblower Program was created in 2010 to encourage individuals to report violations of the Commodity Exchange Act (CEA) and other CFTC regulations. The program provides financial incentives to whistleblowers who report information that leads to successful enforcement actions, as well as protections against retaliation from their employers. Over the years CFTC whistleblowers have received whistleblower awards in the tens of millions of dollars and with the use of a CFTC whistleblower lawyer can potentially remain anonymous from start to finish.
Criteria for Eligibility for CFTC Whistleblower Rewards
To be eligible for an award under the CFTC Whistleblower Program, whistleblowers must meet certain criteria. First, they must voluntarily provide original information to the CFTC that leads to a successful enforcement action. The information provided must be specific, credible, and timely. Second, the enforcement action must result in monetary sanctions of over $1 million. Third, the whistleblower must be the first to provide the information to the CFTC, or their information must significantly contribute to the success of the enforcement action. Time is always of the essence, so if you see something, say something promptly and in the right manner.
Under the CFTC Whistleblower Program, whistleblowers are protected against retaliation from their employers. Employers are prohibited from retaliating against whistleblowers who report violations of the CEA or other CFTC regulations. If an employer does retaliate against a whistleblower, the whistleblower can file a complaint with the Department of Labor (DOL). The DOL will investigate the complaint and, if it finds evidence of retaliation, can order the employer to reinstate the whistleblower, pay back pay and other damages, and take other actions to protect the whistleblower.
CFTC Whistleblower Awards
Whistleblowers who provide information that leads to successful enforcement actions can receive awards of between 10% and 30% of the monetary sanctions collected by the CFTC. The amount of the award is determined by the CFTC based on several factors, including the significance of the information provided, the degree of assistance provided by the whistleblower, and the interest of the CFTC in the enforcement action.
Examples of Successful CFTC Whistleblower Settlements
Since the creation of the CFTC Whistleblower Program, the CFTC has issued several enforcement actions resulting in significant monetary sanctions. For example, in 2017, the CFTC ordered a trading firm to pay $16 million in monetary sanctions for engaging in spoofing, a type of market manipulation. The CFTC’s investigation was based on information provided by a whistleblower, who received a whistleblower award of over $1.5 million for their role in the successful enforcement action.
In 2018, the CFTC ordered a bank to pay $30 million in monetary sanctions for manipulating the ISDAFIX benchmark. The CFTC’s investigation was based on information provided by two whistleblowers, who received a CFTC whistleblower for their role in the successful enforcement action. The $45 million award is the largest award issued under the CFTC Whistleblower Program to date.
On October 21, 2021, the Commodity Futures Trading Commission (CFTC) awarded almost $200 million to a whistleblower whose information contributed to a successful enforcement action, as well as two related actions by a US federal regulator and a foreign regulator. The whistleblower’s information provided direct evidence of wrongdoing, and the CFTC determined that the whistleblower met the standard for a meaningful nexus between the information provided and the CFTC’s ability to complete its investigation successfully.
Fact Patterns to be on the Lookout for
Whistleblowers who are considering reporting violations of the CEA or other CFTC regulations should be on the lookout for several fact patterns. These fact patterns may indicate that a violation has occurred and could provide valuable information to the CFTC:
False Reporting: False reporting occurs when a trader submits false information to a reporting facility, such as a swap data repository or a clearinghouse. False reporting can distort market prices and manipulate the market.
Insider Trading: Insider trading occurs when a trader uses material, non-public information to trade in a market. Insider trading can give the trader an unfair advantage and can harm other market participants.
Manipulation: Manipulation occurs when a trader engages in conduct that artificially affects the price of a commodity. Manipulation can distort market prices and harm other market participants.
Unusual trading activity: If you notice a sudden spike or drop in the price of a particular commodity or derivative, this may be a sign of price manipulation.
False reporting: If a company is reporting false information about its financials or operations, this could be a violation of CFTC regulations.
Unregistered firms or individuals: If you come across a firm or individual who is not registered with the CFTC but is engaged in activities that require registration, this could be a violation of the Commodity Exchange Act.
Misuse of customer funds: If you become aware of a broker or trader who is using customer funds for personal gain or engaging in other fraudulent activities, this may be a violation of CFTC regulations.
Violations of position limits: If you notice a trader who is exceeding the position limits on a particular commodity or derivative, this may be a violation of CFTC regulations.
False advertising: If a company is making false or misleading claims about its products or services in order to attract investors, this could be a violation of CFTC regulations.
Ponzi Schemes: Ponzi schemes are fraudulent investment schemes that promise high returns but actually use new investor funds to pay off earlier investors, rather than generating legitimate profits. Some common red flags that may indicate a Ponzi scheme include:
High, consistent returns: If an investment opportunity is promising unusually high or consistent returns, this may be a sign of a Ponzi scheme. Legitimate investments typically involve some level of risk and are not guaranteed to generate consistent returns.
Pressure to invest: If someone is pressuring you to invest quickly or is encouraging you to invest all of your savings, this may be a sign of a Ponzi scheme. Ponzi schemes often rely on pressure tactics to get investors to hand over their money quickly.
Lack of documentation: If an investment opportunity does not provide detailed documentation about its business plan or financials, this may be a sign of a Ponzi scheme. Legitimate investments should provide clear information about how investor funds will be used and should be transparent about their financials.
Unlicensed sellers: If the person selling the investment opportunity is not licensed or registered with the appropriate regulatory agencies, this may be a sign of a Ponzi scheme. Legitimate investment sellers should be properly registered and licensed with the appropriate regulatory agencies.
Difficulty accessing funds: If an investment opportunity makes it difficult or impossible to withdraw your funds, this may be a sign of a Ponzi scheme. Ponzi schemes often use new investor funds to pay off earlier investors, so it may be difficult to access your funds if the scheme is collapsing.
The CFTC whistleblower program provides an important avenue for individuals to report fraudulent activities in the commodities and derivatives markets. By providing financial incentives and protections against retaliation, the program encourages individuals with knowledge of such activities to come forward and provide valuable information to the CFTC. As the program continues to evolve, it is likely that even more whistleblowers will come forward and play a critical role in protecting the integrity of these markets and insiders with information should avail themselves of a free confidential consultation with a CFTC whistleblower lawyer.