On May 18, the U.S. Commodity Futures Trading Commission (CFTC) Whistleblower Office issued a Notice of Covered Action (NCA) for an enforcement action taken against Kraft Foods Group, Inc. and Mondelēz Global LLC. The CFTC charged the companies with manipulating prices of cash wheat and wheat futures. The NCA means that the CFTC Whistleblower Office is now accepting whistleblower award claims for the enforcement action, in which Kraft and Mondelēz are to pay $16 million.
The CFTC alleges that “in response to high cash wheat prices in late Summer 2011, Kraft and Mondelēz developed, approved, and executed in early December 2011 a strategy to buy $90 million of December 2011 wheat futures, which amounted to a six-month supply of wheat.” According to the CFTC, “Kraft and Mondelēz never intended to take delivery of this wheat and instead executed this strategy expecting that the market would react to their enormous long position by lowering cash wheat prices and strengthening the spread between December 2011 wheat and March 2012 wheat futures.”
Based on this alleged scheme, Kraft and Mondelēz reportedly earned over $5.4 million in profits. The CFTC further alleges that “on five dates in early December 2011, Kraft and Mondelēz held long positions in December 2011 wheat that exceeded the CBOT’s 600-contract speculative spot month position limit by as much as 2,110 contracts without having a valid hedge exemption in place or a bona fide need for that quantity of wheat.”
“This case goes to the core of the CFTC’s mission: protecting market participants and the public from manipulation and abusive practices that undermine the integrity of the derivatives markets,” said Aitan Goelman, the CFTC’s Director of Enforcement. “A market participant who is not happy with cash prices available to it may not resort to manipulative trading strategies in an attempt to artificially lower that price.”
The NCAs mean that the CFTC is now accepting whistleblower award applications for the case. By posting a NCA, the CFTC has not made any determination that a whistleblower contributed to the success of the case. The agency posts NCAs for any action in which over $1 million in sanctions are collected. Individuals have 90 days from the date the NCA is posted to apply for an award by submitting a Form WB-APP.
Through the CFTC Whistleblower Program, qualified whistleblowers, individuals who voluntarily provide original information which leads to a successful enforcement action, are entitled to a monetary award of 10-30% of funds recovered by the government in the action.
Since issuing its first award in 2014, the CFTC has doled out approximately $330 million in whistleblower awards in connection to enforcement actions that have resulted in monetary sanctions totaling more than $3 billion.