A CFTC whistleblower is an individual who comes forward to report potential violations of the Commodity Exchange Act (CEA) or the rules and regulations that support it to the Commodity Futures Trading Commission.

These whistleblowers are typically employees of companies that are regulated by the CFTC, including futures commission merchants (FCMs), which are like broker-dealers, and commodity pool operators (CPOs), which are like investment advisors. However, a CFTC whistleblower can be anyone with relevant information about potential misconduct, such as traders, analysts, consultants or market participants.

A CFTC whistleblower might report fraud, such as affinity fraud or misappropriation of customer funds, or violations such as market manipulation, trading violations, and other types of misconduct related to cryptocurrency and digital assets.

CFTC whistleblowers often remain anonymous, even if they are the recipient of a whistleblower award, given the strong anonymity and confidentiality protections of the CFTC Whistleblower Program.

Like any whistleblower, a CFTC whistleblower may have a variety of motivations. They may be driven by a sense of public duty, a desire to protect market participants and market integrity, or a belief that the reported violations pose a systemic risk to the financial system. They may seek to protect a company and its investors from reputational risk or financial consequences, and they may also have a personal experience with the company or the relevant individuals that motivates them to come forward.

Over the last 35 years practicing whistleblower law, we have worked with many types of CFTC whistleblowers, including:

• Market Participants: This includes those who are involved in the commodities markets, such as traders, brokers, or investors. Their knowledge can provide valuable insights into manipulation schemes, reporting violations, and other forms of misconduct.
• Researchers: Academics, researchers, and journalists who uncover evidence of market manipulation or other violations through their research or investigative work, or other individuals who uncover evidence of wrongdoing.

Regardless of background, many CFTC whistleblowers are motivated to report violations of law to protect market participants and financial markets from further harm and disruption.

The CFTC pays monetary awards to eligible whistleblowers who voluntarily disclose original information about CEA violations that leads the CFTC to bring a successful enforcement action resulting in monetary sanctions exceeding $1 million. CFTC whistleblower awards are between 10% and 30% of the amount of monetary sanctions collected in the enforcement action. The CFTC also pays whistleblower awards to eligible whistleblowers whose information leads to the successful enforcement of a related action brought by another agency (such as the Securities and Exchange Commission). Continue reading to learn more!

A primary reason companies or individuals violate the CEA is to illicitly profit at the expense of legitimate market participants. Their actions disrupt the fair and orderly functioning of markets, often leading to losses for market participants who have placed their trust in the integrity of the market and the regulated entities that act as gatekeepers.

The types of commodities law violations CFTC whistleblowers might report include:

• Market Manipulation: This might include spoofing, placing orders with the intent of cancelling them before they are executed to create the false perception of supply and demand. This may also include insider trading, which refers to the process of trading on non-public information that could materially affect the price of a commodity, or wash trading, which refers to the process of engaging in self-dealing transactions to create the illusion of trading activity to manipulate pricing.
• AML Violations: This can include using the commodities markets to launder the proceeds of criminal activity, such as drug trafficking or other illegal activities.
• Unauthorized Swap Transactions: This can include engaging in derivatives transactions, such as swaps, without the proper authorization or registration required by the CEA. This can also include conducting swaps with unregistered entities or failing to comply with regulations governing the execution and reporting of complex financial instruments.
• Registration and Reporting Violations: Registration violations occur when entities or individuals engage in activities that require registration with the CFTC but fail to do so. This can include operating as a FCM or CPO without the necessary licenses and oversight. Reporting violations occur when regulated entities fail to fulfill the data reporting requirements for those types of entities under the CEA and CFTC rules. This conduct can impede the CFTC’s ability to carry out its mission and to identify and mitigate systemic risks.
• Other Fraudulent Practices: This includes making false or misleading statements about a potential investment opportunity and even theft, where money is stolen through fake commodity trading platforms.

There are many other types of CEA violations, including Forex scams, benchmark manipulation, and illegal off-exchange transactions involving precious metals.

Under the CEA, the CFTC has jurisdiction to enforce matters involving (1) virtual currencies used in derivatives contracts, and (2) fraud or manipulation involving virtual currencies traded in interstate commerce.

In 2019, the CFTC Whistleblower Office issued an alert encouraging individuals to report instances of virtual currency fraud. The alert highlighted the potential for whistleblower awards for individuals who provide information to the CFTC about such activities. According to annual reports released by the CFTC Whistleblower Office, approximately 40% of tips submitted under the CFTC’s Whistleblower Program are related to cryptocurrency.

The CFTC has taken enforcement actions against various types of cryptocurrency fraud, including price manipulation schemes (such as pump-and-dump schemes), pre-arranged or wash trading of virtual currencies, and the trading of virtual currency futures, options, or swaps on unregistered domestic platforms or facilities.

Created by the Dodd-Frank Act and administered by the CFTC’s Whistleblower Office, the CFTC Whistleblower Program provides monetary awards to eligible individuals who voluntarily report possible violations of the CEA. The key features of this program include the following:

• Whistleblower Awards: the CFTC pays mandatory awards to eligible whistleblowers who provide the CFTC with original information regarding violations of the CEA, which leads to a successful enforcement resulting in sanctions exceeding a threshold of $1 million. The percentage of this award ranges between 10% and 30% of the amount of the monetary sanctions collected.
• Anti-Retaliation Protections: The Dodd-Frank Act prohibits employers from taking any action to impede an employee’s decision to provide the CFTC with information about possible violations. Employers are prohibited from discharging, demoting, suspending, threatening, harassing (directly or indirectly), or discriminating in any other way against a whistleblower in the terms and conditions of employment because of any lawful act done by the whistleblower. A whistleblower who has been retaliated against has the right to sue an employer in federal court within two years of the retaliation.
• Anonymous Submissions: CFTC whistleblowers can submit their information anonymously but must provide a method of contact for the CFTC to use, such as counsel retained for that purpose.
• Confidentiality: Regardless of whether a tip is filed anonymously or not, the CFTC is highly committed to protecting a whistleblower’s identity. The CFTC is generally required not to disclose any information that could reasonably be expected to reveal a whistleblower’s identity.

To be an eligible CFTC whistleblower, you must meet the following requirements:

• The information must be submitted by an individual. Only individuals can be considered under the whistleblower program, not companies or other entities. A whistleblower attorney may submit a disclosure on behalf of an individual whistleblower.
• The information you provide must be done voluntarily. This means that the whistleblower is reporting information without being asked to do so.
• The information you provide must be original. This means the information is not yet known to the CFTC prior to a request or inquiry for more information.
• The information you provide must lead to an enforcement action that meets the $1 million threshold. The minimum threshold to be eligible for a whistleblower award under the CFTC program is $1 million.

For more information about the CFTC Whistleblower Program, read our FAQ CFTC Whistleblower Program: Guide to Reporting Commodities Fraud

If you meet all the requirements to become a CFTC whistleblower, we suggest getting in touch with our firm for legal assistance. In many CFTC whistleblower cases, we only get paid if we win your case. Consider getting in touch with our firm using the contact form below.