In a record-setting year, the Commodity Futures Trading Commission (CFTC) obtained monetary relief of over $17.1 billion in fiscal year 2024. This was the agency’s largest yearly total ever, and included $2.6 billion in civil monetary penalties and $14.5 billion in disgorgement and restitution. These totals are largely due to the CFTC’s record-breaking $12.7 billion recovery against FTX and Alameda Research.
Historic Recoveries: FTX and Alameda Research Case
In fiscal year 2024, the CFTC brought 58 new actions, including the fraud case against FTX and Alameda Research. The settlement in that case required the companies to pay $8.7 billion in restitution and $4 billion in disgorgement to compensate victims for making material misrepresentations and omissions to customers and touting itself as “the safest and easiest way to buy and sell crypto,” when, in fact, it commingled and misappropriated customer funds. The combined $12.7 billion judgment is the largest recovery in CFTC history. The CFTC’s litigation continues against the other defendants in that case, including FTX cryptocurrency exchange founder Samuel Bankman-Fried, FTX co-founder Gary Wang, Alameda co-CEO Caroline Ellison, and FTX co-owner Nishad Singh.
CFTC Enforcement Expands to Binance and Digital Assets
In addition to the FTX settlement, the CFTC had a first-of-its-kind recovery against Binance, its founder Changpeng Zhao, and a former chief compliance officer, Samuel Lim, for operating an illegal digital asset derivatives exchange and willfully evading or attempting to evade provisions of the Commodity Exchange Act and CFTC regulations. A court ordered Binance to pay $1.35 billion in penalties and $1.35 billion in disgorgement, Zhao to pay $150 million in penalties, and Lim to pay $1.5 million in penalties.
CFTC Director of Enforcement Ian McGinley said of the year’s results, “Our actions in FY 2024 reflect our commitment to holding recidivist actors accountable, obtaining meaningful monetary relief and sanctions, and implementing robust remediation measures.”
“This was a year of large-scale, complex cases and settlements in both our traditional markets and in areas of increasing importance, such as voluntary carbon markets. We are committed to prioritizing strong, effective, and focused enforcement to deter future misconduct,” McGinley added.
Role of Whistleblowers in CFTC’s Record Year
Whistleblowers played an integral role in the CFTC’s enforcement efforts in 2024, accounting for approximately 42% of the agency’s enforcement successes. In fiscal year 2024, the CFTC received a record of over 1,700 whistleblower tips, granted a record 15 applications for awards totaling over $42 million, and collected roughly $162 million in monetary relief from enforcement actions involving whistleblowers. Since the inception of the CFTC’s Whistleblower Program, the CFTC has issued 53 orders granting nearly $390 million in awards that resulted from enforcement actions that recovered over $3.2 billion.
Notable Whistleblower Awards in 2024
The CFTC made several notable whistleblower awards in fiscal year 2024. The agency awarded $18 million to a whistleblower who provided highly significant independent analysis of both public information and information from non-public sources which assisted in the CFTC’s investigation and led another authority to initiate an enforcement action, demonstrating the value of original, independent analysis.
The agency also awarded $8 million to a company insider whose information led multiple regulators to open investigations and bring enforcement actions. The award is striking because the whistleblower was culpable in the misconduct, but brought forward highly valuable insider knowledge to the agency. The whistleblower’s involvement did, however, reduce the award amount.
In addition, for the first time in the CFTC whistleblower program’s history, it awarded a compliance officer $1.25 million for reporting misconduct to the agency after initially reporting the fraud internally. In many instances, compliance officers do not qualify for whistleblower awards because information they obtain through the course of their normal duties does not qualify as “original information.” But the CFTC’s rules contain an exception for a compliance officer who first reports the misconduct internally and reports to the CFTC after the company fails to take corrective action within 120 days. That exception applied in this case.
Contact Phillips & Cohen for Whistleblower Representation
Whistleblowers who suspect possible commodities fraud can contact an experienced CFTC whistleblower attorney at Phillips & Cohen. Phillips & Cohen is the most successful law firm representing whistleblowers before the CFTC and the SEC.