On October 21, the U.S. Commodity Futures Trading Commission (CFTC) announced a whistleblower award of nearly $200 million. The whistleblower offered “specific, credible, and timely original information” that “significantly contributed to an already open investigation and led to a successful enforcement action.” The whistleblower’s contributions also led to the “success of two related actions, by a U.S. federal regulator and a foreign regulator.” This is the largest award the CFTC has given to a single whistleblower.
According to the award order, the Claims Review Staff advised that the CFTC deny the whistleblower’s award application in a Preliminary Determination. The whistleblower, or “Claimant 1” in the order, then “submitted a timely request for reconsideration of the Preliminary Determination” and provided additional information about how a Federal Regulator used the information they provided. “Based on the additional information received from Claimant 1 and the Federal Regulator, the Commission has determined that Claimant 1 significantly contributed to the success of the Covered Action and two of the Related Actions,” the order reads.
The exact percentages for the Covered Action, “related action brought by the Federal Regulator, and “the related action brought by the Foreign Regulator” that all make up the whistleblower’s award are redacted. The award order also states that the Commission denied the whistleblower’s “additional related action award application” because they did not establish that they provided information to the State Regulator.
The award order details the process through which the whistleblower’s request for reconsideration of the Preliminary Determination went. According to the order, the whistleblower “provided information that led to the successful enforcement of the Covered Action and two of the related actions because he/she significantly contributed to the Division’s investigation through original information that he/she voluntarily provided.”
The order touched on the fact that in order for a whistleblower to be eligible for an award, “there must be a ‘meaningful nexus’ between the information the whistleblower provided and the ‘Commission’s ability to successfully complete its investigation, and to either obtain a settlement or prevail in a litigated proceeding.’” In this case, the whistleblower’s information “led to a successful enforcement action because it had a meaningful nexus to the Commission’s ability to obtain [redacted] of the Covered Action.”
The CFTC assessed that the whistleblower “qualifies for an award for the Federal and Foreign Regulator actions, but does not qualify for an award brought by the State Regulator,” the reason being that the whistleblower’s information “was not shared with the State Regulator.” The order also delves into the Commission’s deciding of the award amount.
“With this award, the CFTC has granted whistleblower awards associated with enforcement actions that have resulted in monetary sanctions totaling more than $3 billion,” the press release states. Since the CFTC Whistleblower Program issued its first award in 2014, the agency has issued more than $300 million to whistleblowers. Whistleblowers “are eligible to receive between 10 and 30 percent of the monetary sanctions collected,” the press release states.
In addition, all whistleblower awards are paid out of the CFTC Customer Protection Fund, which is “financed entirely through monetary sanctions paid to the CFTC by violators” of the Commodity Exchange Act. Earlier in the year, President Biden signed into law emergency legislation to save the Fund from financial collapse; it had become endangered due to its own success and depleted from the number of awards issued.
On the same day as the CTFC announced the award, CFTC Commissioner Dawn D. Stump issued a statement about the whistleblower award determination. Stump voiced her disagreement with the Commission’s decision to award the whistleblower in relation “to the Foreign Regulator’s action.” While she emphasized her support for the agency’s whistleblower program, she pointed to the aspect of the case that dealt with a foreign futures authority. “While the Commission supports the efforts of foreign futures authorities to hold violators accountable, I believe we must undertake close scrutiny to assure ourselves that, in a given case, it is appropriate to take money from the Customer Protection Fund for an award to a whistleblower who provided information to a foreign futures authority about a violation of foreign laws,” Stump wrote in her statement.
