CFTC Accepting Whistleblower Award Claims for $20 Million Commodities Ponzi Scheme Case

Ponzi Scheme

On November 17, the U.S. Commodity Futures Trading Commission (CFTC) posted a Notice of Covered Action (NCA) for a $20 million enforcement action taken against an Illinois man and his entities for operating a commodity pool Ponzi scheme.

The NCA signals that the CFTC is now accepting whistleblower award claims for the case. Through the CFTC Whistleblower Program, qualified whistleblowers are entitled to monetary awards of 10-30% of the sanctions collected by the CFTC in the enforcement action connected to their whistleblowing.

In May, the CFTC filed an action against Phillip Galles and the various Tyche entities he controlled, including Tyche Asset Management LLC, Tyche Master Fund Ltd, and Tyche Asset Trade LLC. On November 15, the U.S. District Court for the Northern District of Illinois entered an order of final judgment against Galles and his Tyche entities.

According to the CFTC, the order found Galles and the Tyche entities “liable for fraudulently soliciting investments in a purported commodity pool, misappropriating pool participants’ funds; violating CFTC regulations governing the proper operation of commodity pools; and making false and misleading statements to the National Futures Association (NFA), a registered futures association, which is responsible for certain aspects of the regulation of futures and derivatives entities under the Commodity Exchange Act (CEA).”

The order further found that Galles and the Tyche entities defrauded 65 people out of over $5 million. According to the CFTC, Galles “falsely claimed to be a managed futures hedge-fund magnate with billions of dollars under management at Tyche Asset Management LLC and its affiliated entities” and “used very little participant funds to place trades, and instead Galles used the money to fund his lavish lifestyle and to promote his fabricated image as a hedge fund tycoon.”

Under the order, Galles and the Tyche entities are to pay $5,327,173 in restitution and a $15,981,519 penalty.

The CFTC’s NCA gives individuals 90 days to file a WB-APP to apply for a whistleblower award for the case. CFTC whistleblowers who voluntarily provide the agency with original information that contributes to the success of an enforcement action are entitled to a whistleblower award. 

Since the CFTC Whistleblower Program was established in 2010, whistleblower tips have allowed the CFTC to recover over $3 billion from fraudsters. The program has in turn paid out over $365 million in whistleblower awards.

In the 2023 Fiscal Year, the program received a record 1,530 whistleblower tips. The CFTC Whistleblower Program is currently in danger of being a victim of its own success, as a funding crisis threatens to undermine the program. A bipartisan bill introduced in July provides a long-term fix to the funding issue undermining the CFTC Whistleblower Program. The CFTC Whistleblower Fund Improvement Act is widely supported by whistleblower advocates.

National Whistleblower Center (NWC) is calling for the immediate passage of the CFTC Whistleblower Fund Improvement Act. NWC has set up an Action Alert calling on whistleblower supports to join them in urging Congress to pass the bill.

Join NWC in Taking Action:

Save the CFTC Whistleblower Program

Further Reading:

Notice of Covered Action No. 2023-032

CFTC Set New Record for Whistleblower Tips in FY 2023

Leading Whistleblower Attorney: Congress Must Pass CFTC Whistleblower Funding Law

More CFTC Whistleblower News

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