On August 1, New York Attorney General Letitia James issued an investor alert calling on New Yorkers “deceived or affected by the cryptocurrency crash” to come forward and contact her office. In her alert, James specifically calls for employees of crypto firms with knowledge of misconduct to file whistleblower complaints with her office. If individuals have information about cryptocurrency fraud, they could qualify for monetary awards if they contact the Commodity Futures Trading Commission (CFTC) or Securities and Exchange Commission (SEC) whistleblower programs.
“The recent turbulence and significant losses in the cryptocurrency market are concerning,” said Attorney General James. “Investors were promised large returns on cryptocurrencies, but instead lost their hard-earned money. I urge any New Yorker who believes they were deceived by crypto platforms to contact my office, and I encourage workers in crypto companies who may have witnessed misconduct to file a whistleblower complaint.”
The New York Attorney General maintains a whistleblower portal where whistleblowers may anonymously submit tips. “The New York Attorney General welcomes and encourages whistleblowers, tips, and complaints,” the webpage states. “Whistleblowers are essential to fulfilling our mission – protecting the citizens of New York. Whistleblowing insiders are particularly critical in opaque industries, where transparency is limited. We take special care to protect whistleblowers.”
Cryptocurrency fraud often falls under the jurisdiction of either the CFTC or SEC, and both agencies have highly successful whistleblower programs. Types of misconduct within the scope of the CFTC and SEC whistleblower programs may include market manipulation, such as pump and dump schemes, misstatements or omissions in required disclosures, sales of unregistered securities, insider trading, and Ponzi schemes.
In 2019, the CFTC posted a whistleblower alert about virtual currency fraud. The alert was meant to “inform members of the public about how they may make themselves eligible for both financial awards and certain protections while helping stop fraud and manipulation relating to virtual currencies.”
Through the SEC and CFTC whistleblower programs, qualified whistleblowers, individuals who voluntarily provide the agency with original information that leads to a successful enforcement action, are entitled to monetary awards of 10-30% of the funds collected in the enforcement action.
In August 2021, the CFTC Whistleblower Office posted Notices of Covered Actions (NCAs) for enforcement actions related to cryptocurrency fraud. The NCAs signaled that individuals could submit whistleblower award claims in connection to the cases.
On March 16, 2022, the Chairman of the 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 and focused on the role the agency’s whistleblower program plays in fighting 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.”
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CFTC Chairman Highlights Whistleblower Program and Cryptocurrency in Speech