CFTC Whistleblower Practice
Like the SEC Whistleblower Program, the Commodities Futures Trading Commission (“CFTC”) Whistleblower Program was created by Congress under the Dodd Frank Wall Street Reform and Consumer Protection Act to encourage private citizens to blow the whistle on fraud involving the futures and options markets. The CFTC Whistleblower Program provides whistleblowers with a reward of between ten and thirty percent of any recovery in a successful CFTC action based on original information provided by the whistleblower to the CFTC.
COMMON TYPES OF CFTC FRAUD
The CFTC seeks to root out any fraud made during or involving trading on the futures and options markets. This fraud can take several forms including:
Foreign Currency Trading scams involving churning (excessive, often unauthorized trading in a particular account to drive up commissions), fake investment funds, peddling phony software claiming to solve the market, among others;
Ponzi schemes organized by “commodity pool operators” who solicit investments within a particular community for commodity futures and options trading and then keep the money;
Precious Metals fraud involving fraudulent sales or investments made by “metals dealers” claiming the investor can make a lot of money very little risk through “financing agreements” that allow investors to pay a small percentage up front with the rest being loaned by the company.
Other acts that can make up actionable violations under the statute include: unauthorized trading on an investors account, wrongful liquidation or closing of an investors position, misappropriation of investor funds by a broker, breaches of fiduciary duty in some cases, failure to disclose material facts with regard to an investors positions or account, among others.
The CFTC Whistleblower Program provides that eligible whistleblowers who may collect an award include those persons who voluntarily provide original information to the CFTC about the commission of any violation of the securities laws. Whistleblowers need not be company insiders or even U.S. citizens to collect a whistleblower award under the program; however, the amount of the award will be based on the significance of the information provided to the CFTC, the degree of assistance provided to the CFTC during its investigation, and, the CFTC’s interest in deterring the conduct making up the violation. In order for a whistleblower to collect an award, the recovery by the CFTC must be in excess of $1 million.
CFTC WHISTLEBLOWER PROTECTIONS