CFTC Accepting Whistleblower Award Claims for Leveraged Bitcoin Fraud Case

Crypto Whistleblowers

On September 12, the Commodity Futures Trading Commission (CFTC) posted a Notice of Covered Action (NCA) for an enforcement action taken against a Utah man charged with fraudulently soliciting pool participants to trade leveraged bitcoin in a commodity pool.

A 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 funds collected in the enforcement action connected to their whistleblowing.

According to the CFTC, from 2017 through 2020, John Orvidas “fraudulently solicited at least four people (pool participants) to trade leveraged bitcoin in a commodity pool, lost almost all funds trading, and then lied to pool participants about the losses and the availability of their money.” The CFTC also charged Orvidas with failing to register as a commodity pool operator.

To settle the charges, Orvidas will pay $2.5 million.

“Protecting ordinary people has always been at the heart of the CFTC’s digital-asset enforcement program,” said Director of Enforcement Ian McGinley. “While digital-asset cases are often complex, this bitcoin case is a straight-up fraud: simple and old as time. We will continue to deploy every weapon in our arsenal to fight fraud in all our markets.”

Cryptocurrency fraud has become a main target for the CFTC Whistleblower Program. The CFTC has jurisdiction over a wide-variety of types of cryptocurrency fraud, including price manipulation (like pump-and-dump schemes) involving virtual currencies, wash trading of virtual currencies, and unregistered trading of virtual currency futures. In August 2021, the CFTC posted Notices of Covered Actions for enforcement actions involving cryptocurrency fraud, including a case where the CFTC penalized five companies nearly $100 million for operating a cryptocurrency derivatives trading platform without having properly registered to do so.

According to the CFTC’s 2022 Annual Report on its whistleblower program, in fiscal year 2022 the agency received 1,506 whistleblower tips, compared to 961 received in the 2021 fiscal year. According to the report, “[t]he majority of tips received during the Period involved fraudulent misappropriation and fraudulent solicitation involving crypto/digital assets (e.g., pump-and dumps, fraudulent representations of opportunities, or refusals to honor withdrawal requests).”

In November, CFTC Commissioner Kristin Johnson told Bloomberg that crypto whistleblowers can report anonymously and that in regards to whistleblower award payments to crypto whistleblowers “the numbers are very big.”

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.

Further Reading:

CFTC Notice of Covered Actions

CFTC Orders Utah Man to Pay More Than $2.5 Million for Leveraged Bitcoin Fraud and Failure to Register

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