In a new article for Law360, leading whistleblower attorney Stephen M. Kohn calls for Congress to pass the bipartisan CFTC Whistleblower Fund Improvement Act of 2023. The bill addresses a funding crisis threatening to undermine the whistleblower program of the Commodity Futures Trading Commission (CFTC).
In the article, Kohn, a founding partner of Kohn, Kohn & Colapinto outlines the establishment of the CFTC Whistleblower Program and its immense growth over the past decade. The program, which offers monetary awards and anti-retaliation protections to whistleblowers, has allowed the CFTC to recover over $3 billion from fraudsters. It has correspondingly awarded over $330 million to qualified whistleblowers.
“On a tiny budget, the CFTC has created a world-class whistleblower program, which has greatly bolstered the agency’s enforcement efforts as it extends into emergent areas of fraud,” Kohn states.
In July, in honor of National Whistleblower Day, Acting Director of the CFTC’s Whistleblower Office Christina McGlosson told WNN: “The Commodity Futures Trading Commission recognizes the critical role whistleblowers play in our enforcement program every day.”
The CFTC Whistleblower Program is in danger of being a victim of its own success, however. When it established the program, Congress placed a $100 million cap on the fund used to finance the program and pay out whistleblower awards. This fund is entirely financed by sanctions collected through the program, but any sanctions that would exceed the cap are instead placed into the U.S. Department of the Treasury’s general fund.
“Thus, while the CFTC whistleblower program has brought in billions of dollars in sanctions, only a fraction of that has been made available to the program,” explains Kohn. “Large sanctions mean large whistleblower awards, and because the fund is only able to receive such a limited percentage of sanctions, it has been depleting faster than it is being replenished.”
On July 26, Senator Chuck Grassley (R-IA), Senator Maggie Hassan (D-NH), and Representative Zach Nunn (R-IA) introduced the CFTC Whistleblower Fund Improvement Act to address the funding crisis and provide the “long-term fix” which the Chair of the CFTC has said the problem requires.
According to Kohn, the CFTC Whistleblower Fund Improvement Act solves the problem by raising the cap on the fund to $300 million. “This increased cap will ensure that the program will have the necessary cash to award qualified whistleblowers without making new authorizations or expenditures of taxpayer dollars,” he writes. “The bill also makes permanent the separate fund for the whistleblower office operations that was established by the CFTC Fund Management Act.”
“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,” writes Kohn in conclusion.