July 29, 2018
Today, the CFTC announced its largest whistleblower award to date, some $30 million being paid to a whistleblower who supplied information leading to a substantial recovery.
Over the past decade or so, more and more agencies have provided financial incentives to whistleblowers. The incentives encourage individuals (usually but not always company insiders) to alert law enforcement to fraud. Building on the success of the False Claims Act, the Securities and Exchange Commission implemented a whistleblower program as part of the Dodd Frank Act in 2010. (See our blog regarding this years record-setting award.)
After a somewhat quiet start, this program has now taken off. It led to the submission of literally thousands of tips per month. It also led to substantial recoveries from investigations starting with tips and monetary rewards paid to whistleblowers. The IRS started a similar whistleblower program in 2006, with less success so far.
The Commodities Futures Trading Commission whistleblower program has flown under the radar. The CFTC regulates futures and options markets. Its jurisdiction extends to commodities trading, cryptocurrencies, and the multi-trillion dollar swaps market. Since 2010 the CFTC has had a whistleblower program virtually identical to the SEC’s program and also implemented as part of the Dodd Frank Act.
The CFTC’s enforcement powers and whistleblower program won’t fly under the radar screen any more. This type of whistleblower award that gets people’s attention, and CFTC jurisdiction extends to some cutting edge technologies and financial instruments that are likely going to be the focus of substantial law enforcement interest, such as complex derivatives and blockchain technology.
History suggests that wherever financial “creativity” gets velocity through complexity and lack of transparency, fraud schemes are sure to follow. Whistleblower programs like the CFTC’s are critical to the effort to keep up with these fraud schemes.