On January 4, the U.S. Commodity Futures Trading Commission (CFTC) Whistleblower Office posted a Notice of Covered Action (NCA) for a December enforcement action in which a California resident and his corporation agreed to pay over $5 Million for engaging in a romance fraud scheme. This was the first CFTC judgment relating to a “Pig Butchering” scam.
The NCA signals that the agency is now accepting whistleblower awards claims for the case. Through the CFTC Whistleblower Program, qualified whistleblowers, individuals who voluntarily provide original information which leads to a successful enforcement action, are entitled to monetary awards of 10-30% of the funds collected in the action.
According to the CFTC, in 2021 and 2022 ,Cunwen Zhu and his company Justby International Auctions engaged in a “Pig Butchering” scheme. The whistleblower law firm Kohn, Kohn & Colapinto explains that “pig butchering” “is a type of scam that combines elements of romance and investment fraud. The name is a metaphor: just like a farmer feeds a pig to fatten it up before slaughtering it, the scammer fattens their victim with false promises of ‘gains’ before financially slaughtering them.”
The CFTC alleges that Zhu and Justby “acted as ‘money mules’ by obtaining customer funds and then facilitating the transfer of the funds to other scheme players. From approximately April 2021 through March 2022, Zhu and Justby fraudulently misappropriated approximately $1,352,843 in customer funds intended for digital asset commodity and/or forex trading.”
The CFTC Whistleblower Office previously posted a Whistleblower Alert on Romance Investment Frauds. According to the CFTC, “Romance investment frauds most frequently start out via approaches on social media or dating apps. Once a relationship of trust has been established, the fraudster convinces the victim to invest with unregistered offshore forex, precious metals, and/or cryptocurrency dealers, which the “love interest” knows are actually investment frauds.”
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.
A major issue, however, is that the CFTC Whistleblower Program is facing a financial crisis: the fund used to pay awards and finance the program is facing depletion.
Introduced in July by a bipartisan group of senators, the CFTC Whistleblower Fund Improvement Act of 2023 addresses the funding crisis undermining the CFTC Whistleblower Program. “The bipartisan Whistleblower Fund Improvement Act will ensure that the CFTC whistleblower program will not be a victim of its own success and can continue to help root out fraud in the U.S. derivatives markets,” wrote whistleblower attorney Stephen M. Kohn in a previous article calling for the passage of the bill.
Kohn sees the passage of the CFTC Whistleblower Fund Improvement Act as one of the seven most urgently needed whistleblower reforms. National Whistleblower Center (NWC), where Kohn serves as Chairman of the Board, has issued an Action Alert calling on Congress to pass the bill.