For several months, whistleblower advocates have warned that the U.S. Commodity Futures Trading Commission (CFTC) Whistleblower Program is facing a financial crisis. Due to a cap on the fund used to finance the CFTC Office of the Whistleblower and pay whistleblower awards, the agency has been in peril of running out of funds for the whistleblower program. New reporting by the Wall Street Journal details that a potential $100 million-plus award for a Deutsche Bank whistleblower has the program on the verge of collapsing.
According to the Wall Street Journal, the CFTC is in the process of determining a whistleblower award for a former Deutsche Bank AG executive who provided the CFTC and U.S. Department of Justice (DOJ) with information that helped lead to roughly $2.5 billion in settlements, including an $800 million settlement between the bank and the CFTC. The CFTC alleged that Deutsche Bank manipulated the London interbank offered rate (Libor), a benchmark interest rate for setting short-term loans for global banks.
Through the CFTC Whistleblower Program, qualified whistleblowers, individuals who voluntarily provide original information that leads to a successful enforcement action, are entitled to a monetary award of 10-30% of funds recouped by the government in the action.
All whistleblower awards are paid entirely out of the Consumer Protection Fund, which is entirely financed by sanctions paid to the CFTC by fraudsters. However, the Fund is capped at $100 million: any sanctions collected which would push the Fund over this limit are instead deposited to the U.S. Treasury.
According to whistleblower advocates, the CFTC Whistleblower Program’s recent growth and success has nearly depleted the fund. In the 2020 fiscal year, the program set records for both the number of whistleblower tips and whistleblower award claims received. The cap on the Fund was set in 2010, when the whistleblower program was created. In fiscal year 2020, the CFTC received over 1,000 formal whistleblower complaints, dwarfing the 58 complaints received in the program’s first full year. Congress did not anticipate this level of success for the program when it originally set the cap.
On April 30, a group of several whistleblower advocacy groups led by the National Whistleblower Center (NWC) sent a letter to Congress outlining the current crisis at the CFTC. According to the letter, the Consumer Protection Fund is so depleted that “the CFTC has started delaying the processing of whistleblower cases due to a lack of funds and the CFTC Office of the Whistleblower might be forced to furlough staff.”
The potential record-setting award for the Deutsche Bank whistleblower would completely wipe out any remaining money in the fund. Given that most CFTC settlements are for $5 million or less, it would be hard for the CFTC to replenish the Fund after such a large award. The Wall Street Journal article reports that “the agency’s leadership says there is no other option but to furlough the whistleblower office staff if the large award is paid, according to the people familiar with the matter.”
“One of the United States’ top whistleblower reward programs is in danger of collapsing due to its high level of success. Immediate Congressional action is needed. Whistleblowers may be out in the cold for years if Congress does not fix this problem.
“It is crucial for Congress to take action and pass bi-partisan emergency legislation proposed by Senator Charles Grassley, and co-sponsored by Tammy Baldwin (D-Wis), Joni Ernst (R-Iowa), Maggie Hassan (D-NH) and Susan Collins (R-Maine). This way, the size of the Fund used to pay whistleblowers can be increased and the highly successful CFTC Whistleblower Program can continue to operate.
“For the past year, we have warned of this pending disaster for the CFTC program. It is intolerable that the U.S. government uses whistleblowers to obtain invaluable insider information, and then fails to ensure that they can be rewarded.
“Continued Congressional inaction demonstrates a contempt for whistleblowers.”
Kohn references the CFTC Fund Management Act which was introduced on February 24. The bill raises the cap on the Consumer Protection Fund to $150 million and temporarily establishes a separate account to house funds used to pay operating and programming expenses.
When he introduced the bill, Senator Grassley stated “[w]e can’t allow this program to become a victim of its own success. Congress has to pass this bill now to ensure that the CFTC whistleblower program remains solvent and can continue to grow.”
The CFTC Fund Management Act currently awaits action by the U.S. Senate Committee on Agriculture, Nutrition and Forestry.