CFTC Issues Largest Award to Date in Whistleblower Case
The Commodity Futures Trading Commission’s (CFTC) whistleblower program has gained considerable momentum in the past few years as evidenced by its substantial payout of more than $45 million in total to informants. In July, 2018 the CFTC awarded $30 million to a single whistleblower – the largest award given to a whistleblower for providing information about CFTC-related violations. The agency noted that the whistleblower provided “key, original information” that resulted in a successful enforcement action. The $30 million award is the fifth payout from the CFTC to whistleblowers and the first award in over two years. It dwarfs the previous award of $10 million back in 2016.
A Wall Street Journal report reveals that the latest whistleblowing action resulted from commodities violations at JPMorgan Chase. According to an attorney involved in the case, the claim arose from the bank’s failure to disclose certain conflicts of interest regarding funds in commodity related investment accounts. Both the CFTC and the SEC were contacted with information related to the improper conduct in separate whistleblower lawsuits.
In addition to issuing a record-setting award, the CFTC announced another first in its whistleblower program- an award of $70,000 was granted to a foreign resident in July, 2018. The agency noted that the recipient was involved in the alleged violations, but was a junior level employee in a foreign country who did not act with intent or knowledge. The CFTC’s whistleblower program is open to all individuals who meet the criteria. An informant need not reside in the United States or be a citizen of the United States to bring forward credible information and be compensated in a successful action. The CFTC anticipates that this award will indicate to individuals around the globe that the agency welcomes their participation in the whistleblower program.
The CFTC is an independent agency responsible for regulating U.S. derivatives markets, including futures, options, and swaps. In its enforcement capacity, the agency investigates claims that violate the Commodities Exchange Act (CEA) and the CFTC regulations. The scope of the violations within the CFTC’s jurisdiction has grown considerably over the years. The CEA governs activities related to a range of commodities including grains, wheat, corn, oats, cotton, crude oil, heating oil, gasoline and financial instruments, such as stock index futures and swaps. The CFTC has prosecuted a variety of actions related to violations in the financial and commodities markets. Some of its most significant enforcement actions targeted: (i) manipulation of foreign currency benchmark rates, (ii) manipulation of inter-bank interest rates (including LIBOR, Euribor and other interest rate benchmarks), (iii) use of fraudulent tactics in trading credit default swaps, (iv) misappropriation of non-public material information for trading purposes, (v) cryptocurrency schemes, (vi) market manipulation involving commodities, futures, and other derivative instruments, and (vii) failure to disclose conflicts of interest to clients.
The whistleblower program (like the SEC program) is mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. CFTC whistleblowers are protected from disclosure of their identities. Both the SEC and CFTC are required to keep any information that could lead to the identification of whistleblowers confidential and protect informants from possible retaliatory actions. An individual who provides the CFTC with credible information that results in over $1 million in sanctions is entitled to receive an award equaling between ten and thirty percent of the amount collected by the agency.
The CFTC has historically played a smaller role in high-profile whistleblower actions than its counterpart, the SEC. With the magnitude of its most recent award, the agency hopes that industry participants are put on notice that informants are actively reporting violations of commodities trading laws and that the CFTC intends to swiftly investigate and prosecute actions based on this information. Furthermore, would-be whistleblowers should be reminded not to disregard potential commodities law violations inherent in many of the securities fraud cases that are reported to the SEC.
If you have knowledge that a corporation has engaged in a violation of commodities laws, give us a call at 1-800-988-8005 today for a free consultation and case review with an experienced whistleblower attorney.