On April 16, the U.S. Commodity Futures Trading Commission (CFTC) issued a final order granting a monetary award to a whistleblower who provided the agency with original information about commodities fraud. Recently, the CFTC Whistleblower Program has slowed down its issuance of awards because its success has threatened to deplete its reward fund. A recently proposed bill promises to save the successful program by expanding this fund.
While the CFTC did not disclose the amount of the award for confidentiality reasons, CFTC awards are often for millions of dollars – in 2018 the agency awarded a whistleblower $30 million.
According to the award order, the whistleblower’s contributions to the case were “substantial.” The CFTC reports that the whistleblower voluntarily provided a detailed disclosure which was “specific, credible, and timely” and contained information “previously unknown to the Commission and derived from [the whistleblower’s] personal experience and observations.” The CFTC opened an investigation into the misconduct exposed by the whistleblower’s disclosure.
The whistleblower additionally provided ongoing assistance that contributed to the investigation’s success. The CFTC notes this assistance included “engaging in telephone conversations, answering questions about… [the] fraudulent scheme, and providing the Commission documentation to substantiate… misconduct and continued efforts to defraud victims.”
The final order also details an award denial for a claimant who submitted an award application for the same Covered Action. According to the order, the CFTC denied the award application because the claimant “did not provide any information of use in the Commission’s investigation and therefore, did not lead to the successful enforcement of the Covered Action.”
Through the CFTC Whistleblower Program, qualified whistleblowers, individuals who voluntarily provide original information that leads to a successful enforcement action are entitled to a monetary award of 10-30% of funds recovered by the government. According to the CFTC, since issuing its first award in 2014, the program has awarded more than $120 million to whistleblowers.
The 2020 fiscal year was a record year for the program. It received a record number of both whistleblower tips and whistleblower award applications. However, the recent growth and success of the whistleblower program has nearly depleted the CFTC’s Consumer Protection Fund, which is the exclusive fund used to pay CFTC whistleblower awards. The Fund is entirely financed by sanctions paid to the CFTC by fraudsters; however, when Congress established the Fund in 2010 alongside the CFTC Whistleblower Program, it placed a $100 million cap on the Fund.
The recent success of the program has depleted the Fund so significantly that CFTC officials recently informed Senator Chuck Grassley (R-IA) that the agency is postponing the issuance of some rewards. In a recent article about the issue, Stephen M. Kohn, whistleblower attorney at Kohn, Kohn & Colapinto and Chairman of the Board of the National Whistleblower Center explained that “[t]he CFTC is caught between a rock and a hard place. Congress mandates that rewards be paid, but the Fund does not have the money to permit the CFTC to comply with the law. Despite the requirement to compensate them, whistleblowers, many of whom have lost their jobs and careers, now face prolonged economic hardship. The CFTC whistleblower program is in crisis.”
According to Kohn and other whistleblower advocates, the solution to the crisis is simply to increase the size of the Fund’s cap, a move that the CFTC itself also supports. On February 24, a bipartisan group of Senators introduced the CFTC Fund Management Act, which would raise the cap on the Fund from $100 million to $150 million. The Fund would continue to be entirely financed by sanctions and the raised cap would allow the CFTC to issue awards to deserving whistleblowers in a timely manner.
According to Kohn, the bill “is now pending before the Senate Committee on Agriculture, Nutrition and Forestry. In order to ensure that whistleblowers are paid in a timely manner, as mandated under the Dodd-Frank Act, the Chairwomen of the Committee, Senator Debbie Stabenow (D-MI), along with Senator John Boozman (R-AR), the committee’s Ranking Member, are needed to support the bill’s sponsors in their effort to have the CFTC Fund Management Act quickly approved to stop the current financial crisis facing the CFTC.”
The CFTC Whistleblower Award Order
Leading Whistleblower Attorney: The CFTC Whistleblower Program is in Crisis Because of Its Success