The CFTC released an alert regarding fraud or market manipulation in carbon markets.
Carbon markets (CMs) refer to the buying and selling of carbon credits and carbon offsets in the context of a transition to a low-carbon economy. More specifically, carbon credits (or allowances) grant a company the permission to generate one ton of CO2 emissions and serve as market-based initiatives. When dealing with futures contracts, carbon credits are considered commodities under the CFTC’s designated contract markets (DCMs).
Types of Carbon Market Fraud
- Wash Trading: manipulative trading that violates the Commodity Exchange Act in CM futures contracts.
- Ghost Credits: illusory credits listed on CM registries which do not represent real carbon reductions.
- Double Counting
- Misrepresentation in Carbon Credit Terms: these may involve elements such as quality, quantity, project type, and environmental benefits, among others.
- Manipulation of Tokenized Carbon Markets
- For more information on specific types of CM fraud, click here.
Blowing the Whistle on Carbon Market Fraud
- Carbon market fraud is a violation of the Commodity Exchange Act. Individuals may be eligible to participate in the CFTC Whistleblower Program and earn significant CFTC whistleblower awards.
- Individuals may report the violation to the CFTC by filing a Form TCR (Tip, Complaint, Referral). You do not have to be a company “insider,” like a trading firm employee, or a direct victim to blow the whistle.
- If you have high-quality, original information that can lead to enforcement action of more than $1 million in monetary sanctions, you may be eligible for 10%-30% of the rewards from the CFTC Whistleblower Program.
- This program also ensures confidentiality and anti-retaliation protections. Rewards and protection are facilitated under the CFTC, the SEC’s whistleblower program, or the CEA Whistleblower Reward and Anti-Retaliation Law.
Whistleblowers seeking legal advice may contact Kohn, Kohn & Colapinto for a consultation.
