CFTC: ‘Majority’ of FY23 whistleblower cases related to crypto fraud

The CFTC paid approximately $16 million to seven whistleblowers in FY23, which ended Sept. 30, according to the agency’s annual report to Congress on its whistleblower program. Of that figure, approximately $15 million was awarded to one of two whistleblowers in September. The other received about $300,000.

The agency received 1,530 whistleblower tips during FY23, slightly more than FY22 (1,506 tips) and roughly 50 percent more than it received in FY21 and FY20.

Whistleblower awards range from 10 to 30 percent of monetary sanctions collected from an enforcement case.

While it approved payouts to seven whistleblowers, the CFTC rejected the applications of 174 others in FY23, the report said.

The CFTC has issued 41 awards worth almost $350 million total since its whistleblower program was launched in FY10. Total sanctions in all CFTC whistleblower-related cases have topped $3 billion, the agency said.

The type of tips the agency received from whistleblowers in FY23 involved “activities including but not limited to market manipulation; spoofing; insider trading; corruption; illegal swap dealer business conduct; recordkeeping or registration violations; and fraud or manipulation related to digital assets, precious metals, and forex trading,” the report said.

Most tips, the report said, “involved allegations of fraudulent solicitation and subsequent misappropriation of crypto/digital assets (e.g., pump-and-dump schemes, fraudulent representations of moneymaking opportunities, or refusals to honor withdrawal requests). The volume of tips relating to both crypto/digital asset schemes and romance scams continued to be high.”

The CFTC Customer Protection Fund—from which whistleblower awards are paid—contained nearly $270 million as of Sept. 30. This was the same fund nearly drained by a then-record $200 million whistleblower award in October 2021.

The report also examined fraud claims the agency received from consumers in FY23. Of the nearly 2,600 fraud claims received, 85 percent were digital asset related, up slightly from 82 percent in FY22.

CFTC Commissioner Christy Goldsmith Romero, in a statement issued Tuesday supporting the report, said cryptocurrency and digital assets are “an area that continues to have pervasive fraud and other illegality.” She previously called for more robust oversight of the cryptocurrency market by the CFTC and for so-called gatekeepers like lawyers, accountants, auditors, compliance professionals, and others to step up and protect consumers against fraud in the industry.