The Commodity Futures Trading Commission (CFTC) whistleblower program offers whistleblowers rewards, job protection, and confidentiality. It was created under the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, in response to the 2008 financial crisis, to encourage those aware of commodity law violations to notify the CFTC.
The CFTC is an independent agency with regulatory authority over futures trading subject to the Commodity Exchange Act (CEA). The CEA governs a wide range of commodities, including agricultural products, crude oil, and financial instruments, as well as the $400 trillion swaps market.
In 2023, Phillips & Cohen added the former Director of the CFTC’s Whistleblower Office, Christopher Ehrman, to its star roster. Ehrman joined Sean X. McKessy, the first Chief of the SEC Office of the Whistleblower and principal architect of the SEC whistleblower program, Erika Kelton, the attorney with the most awards under the Dodd-Frank whistleblower programs, and numerous other experienced CFTC and SEC attorneys at Phillips &Cohen.
How does the CFTC whistleblower program work?
Those who “voluntarily” provide the CFTC with “original information” about violations of the Commodity Exchange Act – meaning information that is derived from independent knowledge or analyses – are eligible for CFTC whistleblower awards. Whistleblowers submit information using CFTC ‘tip, complaint, or referral’ (TCR) forms directly to the CFTC.
The information must be provided before the CFTC or other enforcement authorities request or demand that information or related information from the whistleblower, or in some circumstances, the whistleblower’s employer.
CFTC whistleblower award eligibility
For a whistleblower to be eligible for a reward, more than $1 million in monetary sanctions must be collected by the CFTC as a result of the whistleblower’s information that prompted or enhanced an enforcement action. If the information provided by the whistleblower leads to an enforcement action with more than $1 million in sanctions, the CFTC publishes a ‘Notice of Covered Action’ on its website. The whistleblower must file a claim for the award within 90 days of the publication of the Notice of Covered Action by submitting a Form WB-APP.
The illegal or improper conduct that the whistleblower reports through the CFTC whistleblower program can occur outside the US.
The CFTC doesn’t require whistleblowers to report their concerns to their employer or their employer’s internal compliance system before providing their information to the CFTC. To encourage the use of internal compliance systems, the CFTC considers internal reporting as one of many factors in deciding the amount of whistleblower awards.
The more specific, credible and timely the whistleblower’s information is, the more likely the CFTC will investigate. Supporting documents also are important.
It is important to submit a whistleblower’s report to the CFTC promptly to improve your chances of an award. When more than one person reports the same violations, the first person who did so is the one who would get the reward.
However, more than one whistleblower who reports the same violations to the CFTC may be eligible for an award if their information significantly contributes to the success of an ongoing enforcement action or prompts the CFTC to re-open a closed investigation or pursue a new line of inquiry in an ongoing investigation.
Who can be a CFTC whistleblower?
Anyone can be a whistleblower – an employee, competitor, client, industry insider, and more. The whistleblower’s nationality and place of residence, whether in the US or in another country, doesn’t matter. Individuals with legal compliance, audit, supervisory, or governance responsibilities are generally not eligible for awards, but exceptions exist if substantial injury is likely and internal reporting has failed.
The CFTC uses its Customer Protection Fund, established by Congress, to pay whistleblower awards. The fund is financed entirely through monetary sanctions paid to the CFTC by violators of the CEA. No money is taken or withheld from injured customers to fund the program.
If the CFTC denies the reward application, whistleblowers can appeal to a United States Court of Appeals.
The CFTC’s whistleblower program offers whistleblowers rewards, protection from retaliation and anonymity.
CFTC whistleblower awards
- CFTC whistleblower awards range from 10 percent to 30 percent of the monetary sanctions collected by a CFTC action or a related action, if more than $1 million is collected as a result of the whistleblower’s information.
- Whistleblowers may be eligible for awards based on related judicial or administrative actions brought by certain other government entities, such as the Department of Justice and foreign futures associations, if there is also a successful related CFTC action.
- The CFTC determines the award percentage based on a number of factors, including the level of assistance the whistleblower and the whistleblower’s attorney provided in the case.
- To qualify for a reward, the whistleblower must be the first to submit the information.
- The CFTC’s largest whistleblower reward – nearly $200 million – was paid to a whistleblower whose specific, credible, and timely original information significantly contributed to an already open investigation and led to a successful enforcement action.
Job protection and confidentiality for CFTC whistleblowers
- Whistleblowers may submit information to the CFTC anonymously, provided that an attorney represents them.
- The CFTC will keep the identity of the whistleblower confidential, whether the whistleblower submitted the information anonymously or not, unless it is required in connection with a public proceeding that the CFTC or another government agency institutes.
- CFTC whistleblowers may receive protection against employer retaliation. The Dodd-Frank Act prohibits employers from firing, demoting, suspending, threatening, harassing, or discriminating against whistleblowers who provide information to or assist the CFTC.
- CFTC whistleblowers who suffer from employment retaliation as a result of their whistleblowing may sue for reinstatement, back pay and any other damages that occurred.
International whistleblowers and the CFTC
The CFTC welcomes whistleblowers from countries around the world. You need not reside in the United States or be a citizen of the United States to submit information or receive an award.
Significant CFTC enforcement actions
The CFTC has in recent years gained greater visibility in enforcement actions in the financial and commodities markets. Among the most significant are:
- Foreign currency rate manipulation: The CFTC and counterpart agencies have fined numerous banks -Barclays, JP Morgan and UBS, among others – for the attempted manipulation of foreign currency benchmark rates. Over $10 billion in fines has been collected in both civil and criminal actions involving foreign exchange (Forex or FX) rate manipulation.
- Inter-bank interest rate manipulation. The CFTC has imposed fines of nearly $2.7 billion on 6 banks – including Deutsche Bank, Barclays, and Royal Bank of Scotland – and 2 interdealer brokers for manipulation of LIBOR, Euribor, and other interest rate benchmarks.
- “London Whale” credit default swap manipulation. The CFTC fined JP Morgan $100 million for employing manipulative tactics in the trading of credit default swaps (CDS).
Phillips & Cohen has experience representing whistleblowers in cases involving complex financial transactions and fraud in commodities markets. We have won one CFTC award for a whistleblower client, and have filed many whistleblower claims under the Dodd-Frank CFTC whistleblower award program and are working closely with enforcement officials on a number of them.
We represented a whistleblower who was awarded more than $32 million under the SEC whistleblower reward program – one of the largest rewards made under the Dodd-Frank whistleblower programs – for his help and that of Phillips & Cohen exposing and stopping a massive securities fraud.
If you are aware of fraud in the commodities markets or violations of commodity laws and would like to discuss your options with experienced and successful whistleblower attorneys, please contact Phillips & Cohen for a free and confidential consultation.