Image of CFTC Whistleblower Program Off to a Slow Start

CFTC Whistleblower Program Off to a Slow Start

 

The recently issued annual report of the CFTC Office of the Whistleblower for fiscal year 2017 (October 1, 2016 through September 30, 2017) indicates that the program is off to a slow start, which is likely attributable to weak enforcement of the Commodity Exchange Act.  During fiscal year 2017, the CFTC brought just 49 enforcement actions.

While the CFTC did not issue a whistleblower award in FY 2017, the Office appears primed to have its biggest year in the program’s history in FY 2018. According to the CFTC’s 2017 Agency Financial Report, the CFTC recognized a “contingent liability of $45.5 million for whistleblower awards that are expected to be paid in FY 2018.” Prior to FY 2018, the CFTC issued four awards totaling approximately $11 million.

According to the CFTC Whistleblower Office annual report the CFTC did not pay out any whistleblower awards during fiscal year 2017 and received approximately 465 whistleblower tips on Form TCRs.  Since the inception of the Whistleblower Program, the CFTC has issued four awards totaling approximately $11 million.  The largest award to date is more than $10 million.

One way to read the report is that whistleblowers are coming forward with high-quality tips, but the CFTC is not acting on those tips.  Indeed, acting on such tips could halt ongoing fraud schemes and prevent further harm to investors.  As the CFTC whistleblower program has been ineffective, Congress should consider amending the Dodd-Frank whistleblower reward provisions to add a qui tam provision, i.e., to permit whistleblowers acting on behalf of the CFTC to prosecute commodities fraud.  The qui tam provisions of the False Claims Act have been extraordinarily effective in combating fraud against the government.  In particular, qui tam relators (whistleblowers) have enabled the federal government to recover approximately $30 billion.

CFTC Whistleblower Tips

The report reveals that whistleblowers disclosed a variety of fraud schemes to the CFTC Whistleblower Office, including:

  • market manipulation;
  • virtual currency trading;
  • false reporting;
  • spoofing and other forms of disruptive trading;
  • Ponzi schemes;
  • protection of customer funds;
  • fraud involving foreign currency exchange; and
  • other off-exchange investment scams involving futures.

CFTC Whistleblower Office Protecting Whistleblower Confidentiality

The CFTC Whistleblower Office continues to take steps to protect whistleblower confidentiality.  In particular, the Office considered 267 requests to produce documents from the investigation and litigation files of the Enforcement Division and found 16 requests to implicate whistleblower-identifying information.  The Office worked with the Enforcement Division to remove whistleblower-identifying information or otherwise take steps to preserve whistleblower confidentiality.

CFTC Whistleblower Office Adopted New Rules to Strengthen CFTC Whistleblower Program

During fiscal year 2017, the CFTC approved amendments to its whistleblower rules that strengthen anti-retaliation protections for whistleblowers, prohibit “gag clauses” in employment agreements, and improve the CFTC Whistleblower Award Program.

Under the new rules, the CFTC can take enforcement action against an employer that “retaliates against a whistleblower by discharge, demotion, suspension, direct or indirect threats or harassment, or any other manner of discrimination” because the whistleblower provided “information to the Commission after reporting the information through internal whistleblower, legal or compliance procedures.”  The anti-retaliation protections apply whether or not the whistleblower satisfies the conditions to qualify for an award.

The SEC Whistleblower Program has been successful and has enabled the SEC to recover nearly one billion dollars in monetary sanctions from wrongdoers, including more than $671 million in disgorgement of ill-gotten gains since 2011.  Though the SEC has a far broader mission, the CFTC could use the whistleblower reward program more effectively to protect investors.   

Experienced and Effective Whistleblower Law Firm Representing Whistleblowers Worldwide

Leading whistleblower law firm represent whistleblowers worldwide before the SEC and CFTC concerning a wide range of violations of the Commodity Exchange Act or federal securities laws, including:

We have assembled a team with a unique mix of experience in government and in the private sector achieving exceptional results for whistleblowers:

  • Two of our attorneys served in senior positions at the U.S. Office of Special Counsel and were appointed by the Secretary of Labor to serve on the Whistleblower Protection Advisory Committee.
  • Matthew Stock is a licensed Certified Public Accountant and Certified Fraud Examiner whose experience working at a large audit firm enhances the firm’s ability to investigate complex financial schemes and prepare effective whistleblower submissions on behalf of whistleblowers worldwide.
  • Dallas Hammer is a seasoned whistleblowers attorney and has developed substantial experience representing cybersecurity whistleblowers.  Recently Corporate Crime Reporter interviewed him about the rise of cybersecurity whistleblowing.
  • Eric Bachman was recently named a top whistleblower lawyer and has substantial experience in whistleblower matters and litigating precedent-setting individual and class action discrimination cases.  His wins include a $100 million settlement in a disparate impact Title VII class action and a $16 million class action settlement against a major grocery chain. Having served as Special Litigation Counsel in the Civil Rights Division of the Department of Justice and as lead or co-counsel in numerous jury trials, Bachman is trial-tested and ready to fight for you to obtain the relief that you deserve.
  • Firm Principal Jason Zuckerman was recognized by Washingtonian magazine as a “Top Whistleblower Lawyer” in 2017, 2015, 2009, and 2007 selected by his peers to be included in The Best Lawyers in America® in the category of employment law (2011-2017), and selected by his peers to be listed in SuperLawyers (2012 and 2015-2017) in the category of labor and employment law. He  is rated 10 out of 10 by Avvo, based largely on client reviews, and rated AV Preeminent® by Martindale-Hubbell based on peer reviews.

SEC whistleblower rules

 

Avatar of Matthew Stock

Matthew Stock is an associate at Zuckerman Law, where his practice focuses on representing whistleblowers in whistleblower rewards and whistleblower retaliation cases. He is also a Certified Public Accountant, Certified Fraud Examiner, and former KPMG external auditor.

Avatar of Jason Zuckerman

Jason Zuckerman, Principal of Zuckerman Law, litigates whistleblower retaliation, qui tam, wrongful discharge, and other employment-related claims. He is rated 10 out of 10 by Avvo, was recognized by Washingtonian magazine as a “Top Whistleblower Lawyer” in 2015 and selected by his peers to be included in The Best Lawyers in America® and in SuperLawyers.