Update: On March 31, Chairman Behnam delivered testimony to the U.S. House of Representatives Committee on Agriculture on the “State of the CFTC.” Behnam once again highlighted the success of the CFTC Whistleblower Program and the key role it plays in the agency’s enforcement efforts. “A part of the enforcement program’s success is rooted in its Whistleblower Program,” he stated. “I am grateful to this Committee’s longstanding support of the Whistleblower Program, and continue to stand ready to ensure its long-term success.”
On March 16, the Chairman of the Commodity Futures Trading Commission (CFTC), Rostin Behnam, gave the keynote address at the Futures Industry Association’s (FIA) 2022 International Futures Industry Conference. In his speech, Behnam offered an overview of the CFTC’s priorities. While offering updates on the agency’s enforcement efforts, Behnam highlighted the success of the CFTC Whistleblower Program.
“I would be remiss if I moved on without highlighting the contributions of the CFTC’s Whistleblower Program, created during the midpoint of the Dodd-Frank rulemaking endurance race,” said Behnam. “Since issuing its first award in 2014, the Commission has granted awards of over $300 million to whistleblowers, including the largest whistleblower award in U.S. history last year.”
The record award referenced by Behnam was a $200 million award issued on October 21, 2021. According to the CFTC, the whistleblower offered “specific, credible, and timely original information” that “significantly contributed to an already open investigation and led to a successful enforcement action” and also led to the “success of two related actions, by a U.S. federal regulator and a foreign regulator.”
Since Behnam delivered the keynote address, the CFTC has continued to award qualified whistleblowers. On March 18, the agency issued a whistleblower award of approximately $10 million to an individual whose disclosure led the agency to open an investigation. On March 28, it awarded approximately $625,000 to four whistleblowers who all voluntarily provided the agency with original information about commodities law violations.
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 his speech, Behnam also underscored the important role whistleblowers play in the agency’s increasing efforts to police cryptocurrency fraud.
“Of the more than 600 whistleblower tips the CFTC has received since October, a large number allege cryptocurrency fraud, such as pump-and-dump schemes, refusals to honor requests to withdraw money, and romance scams,” Behnam remarked. “With greater focus during this time of great global uncertainty on the opportunities that the digital asset infrastructure may afford bad actors, including sanctioned individuals and institutions, to bypass the law and remain anonymous, the CFTC’s Whistleblower Program becomes an increasingly important tool. This too highlights the urgency for a more unified global approach to regulation in the digital asset space.”
In 2019, the CFTC signaled it was actively looking for cryptocurrency whistleblowers when it released a “Whistleblower Alert” on the issue. The alert notes that “when a virtual currency is used in a derivatives contract, or if there is fraud or manipulation involving a virtual currency traded in interstate commerce, CFTC enforcement of the [Commodities Exchange Act] comes into play.”