Image of CFTC Whistleblower Report Reveals Tremendous Success for Taxpayers

CFTC Whistleblower Report Reveals Tremendous Success for Taxpayers

swap fraud whistleblower bounty at CFTCToday the CFTC Whistleblower Program issued its 2022 Annual Report on the Whistleblower Program and Customer Education Initiatives.  The report reveals that sanctions ordered in whistleblower-related enforcement actions exceed $3 billion and the CFTC has issued 36 orders granting awards totaling more than $330 million. In other words, each dollar awarded to whistleblowers results in significant monetary sanctions and furthers the CFTC’s mission of ensuring that the markets it oversees are open, transparent, fair, and competitive.  Key developments and trends for FY22 include:

  • The CFTC paid out a record-breaking award of nearly $200 million, the largest whistleblower award ever granted under the Dodd-Frank Act.
  • The CFTC’s Whistleblower Office received 1,506 whistleblower tips in FY22, which represents an increase of more than 50% over FY21.
  • In FY22, the CFTC Whistleblower Office received tips and complaints regarding a wide range of violations, including record keeping or registration violations, illegal swap dealer business conduct, solicitation, misappropriation, insider trading, and other types of fraud, use of deceptive or manipulative devices in trading, as well as spoofing, and other forms of disruptive trading or market manipulation.
  • A majority of tips received in FY22 involved fraudulent misappropriation and fraudulent solicitation involving crypto/digital assets (e.g., pump-and-dumps, fraudulent representations of opportunities, or refusals to honor withdrawal requests). Since 2014, the CFTC has asserted general anti-fraud and manipulation enforcement authority over bitcoin and other virtual currency commodities and has brought fraud or manipulation-related enforcement actions against participants and companies in the digital asset markets.

A table in the report reveals the significant increase in whistleblower submissions to the CFTC.

CFTC whistleblower TCR submissions

CFTC Whistleblower Reward Program

CFTC whistleblower lawyersUnder the CFTC Whistleblower Reward Program, the CFTC will issue rewards to whistleblowers who provide original information that leads to CFTC enforcement actions with total civil penalties in excess of $1 million (see how the CFTC calculates monetary sanctions). A whistleblower may receive an award of between 10% and 30% of the total monetary sanctions collected.

Original information “leads to” a successful enforcement action if either:

  1. The original information caused the staff to open an investigation, reopen an investigation, or inquire into different conduct as part of a current investigation, and the Commission brought a successful action based in whole or in part on conduct that was the subject of the original information; or
  2. The conduct was already under examination or investigation, and the original information significantly contributed to the success of the action.

In determining a reward percentage, the CFTC considers the particular facts and circumstances of each case. For example, positive factors may include the significance of the information, the level of assistance provided by the whistleblower and the whistleblower’s attorney, and the law enforcement interests at stake.

Whistleblower awards are paid from the CFTC Customer Protection Fund, which is financed through monetary collected by the CFTC in any covered judicial or administrative action that is not otherwise distributed, or ordered to be distributed, to victims of a violation of the CEA underlying such action.

Since 2014, the CFTC has issued more than $330 million in CFTC whistleblower awards. The largest CFTC whistleblower awards to date are:

  • $200 million CFTC whistleblower award (October 21, 2021);
  • $45 million CFTC whistleblower award (August 2, 2018);
  • $30 million CFTC whistleblower award (July 12, 2018);
  • $10 million CFTC whistleblower award (March 28, 2016);
  • $9 million CFTC whistleblower award (July 27, 2020);
  • $7 million CFTC whistleblower award (September 27, 2019);
  • $6 million CFTC whistleblower award (June 9, 2020); and
  • $2.5 million CFTC whistleblower award (June 24, 2019).

The CFTC’s whistleblower alerts summarize some of the key enforcement priorities for which the CFTC seeks specific and credible whistleblower tips:

Anonymous Whistleblowing to the CFTC

Anonymous WhistleblowingIf represented by counsel, a whistleblower may submit a tip anonymously to the CFTC. In certain circumstances, a whistleblower may remain anonymous, even to the CFTC, until an award determination. However, even at the time of a reward, a whistleblower’s identity is not made available to the public.

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.

Matthew Stock is the Director of the Whistleblower Rewards Practice at Zuckerman Law. He represents whistleblowers around the world in SEC, CFTC and IRS whistleblower claims. He is also a Certified Public Accountant, Certified Fraud Examiner and former KPMG external auditor.