The Commodity Futures Trading Commission (CFTC) awarded more than $15 million to five whistleblowers in fiscal year 2019, according to the agency’s annual report to Congress. The independent agency also fielded 455 whistleblower tips, complaints, and referrals last fiscal year.
In contrast, in FY2018, the CFTC paid more than $75 million to five whistleblowers and received 760 whistleblower tips, complaints, and referrals.
FY2018 was a banner year in terms of whistleblowing, though—one of the awards accounted for some $30 million and was the largest ever awarded since the program was created in 2010. The number of tips and complaints the CFTC received in 2018 might have stemmed from increased interest in virtual currencies and the CFTC’s efforts to encourage the public to report virtual currency fraud through its whistleblower program, the agency acknowledged in its annual report.
The Dodd-Frank Wall Street Reform and Consumer Protect Act, passed by Congress in 2010 as a response to the 2008 financial crisis, established the CFTC’s whistleblower program. The law also created a fund to pay whistleblower awards. The CFTC uses the fund to pay awards to whistleblowers who voluntarily provide original information to the CFTC that leads to a successful enforcement action by the agency in which monetary sanctions in excess of $1 million are imposed. Since the program was established, the CFTC has issued 14 awards to whistleblowers totaling about $100 million. Enforcement actions associated with those awards yielded sanctions totaling more than $800 million, the agency reported.
The biggest award in FY2019 was one for $7 million, a decision just announced at the end of September. Information provided by a whistleblower about misconduct triggered a CFTC investigation that found the Commodity Exchange Act had been violated. The award “demonstrates how integral whistleblowers have become to our enforcement efforts,” said CFTC Director of Enforcement James McDonald at the time it was announced.
Interestingly, the information provided by the whistleblower in that matter was not entirely accurate, the CFTC acknowledged when announcing the award. Still, even if somewhat inaccurate information provided by a whistleblower leads the CFTC to “open an investigation resulting in a successful enforcement action, we will reward them accordingly,” said CFTC Whistleblower Office Director Christopher Ehrman at that time.
The other four whistleblower awards made in FY2019 ranged from $1.5 million to $2.5 million. Of those awards, the amount of one was higher than it otherwise would have been because the whistleblower tried to report concerns internally before going to the CFTC. Another was lower than it otherwise would have been because the whistleblower delayed reporting to the agency.
The whistleblower program’s progress
The CFTC pays whistleblowers between 10 and 30 percent of the amount of monetary sanctions it collects in an enforcement action. Whistleblowers’ identities are protected, and employers may not retaliate against employees who report violations. According to the CFTC, employers also may not thwart whistleblowing attempts by threatening to enforce confidentiality agreements they might have with an employee.
Back in FY2012, the CFTC received just 58 whistleblower tips, complaints, or referrals. The number received each year increased steadily, reaching 465 in FY2017. The surge to 760 tips, complaints, or referrals in FY2018 was followed in FY2019 with just 455 tips, complaints, or referrals. Back in 2018, the CFTC issued a customer protection advisory warning people to beware of pump-and-dump schemes involving virtual currencies and digital coins. Such schemes create an artificial demand followed by a quick sale by the scheme’s perpetrators, who then pocket the ill-gained profit.
In FY2019, the CFTC also received 137 tips and complaints submitted by individuals who were not whistleblowers per se. (If they could become whistleblowers, the CFTC encourages them to do so, the agency explained in its annual report). These individuals reported concerns about activities as varied as money laundering, foreign bribery, inadequate risk controls, spoofing and other disruptive trading and market manipulation, and fraud involving virtual currencies.
Lori Tripoli is a writer based in the greater New York City area who focuses on legal and regulatory issues.