Corporate fraud seeps into many areas of everyday life – including the commodities markets. Whistleblowers often risk their reputation and career to report dishonest or illegal conduct taking place in commodity futures and options.
Their reports help prevent harm to the American economy and the hard-working people who rely on it. That’s why CFTC whistleblowers receive between 10% and 30% of any recovery obtained over $1 million as a result of their report.
At Halunen Law, we work with whistleblowers in cases involving fraud in commodities fraud. Our team of CFTC lawyers has the experience and expertise to evaluate your claim. We will pursue it in partnership with enforcement officials and work to obtain the maximum recovery possible.
Types of Fraud Regulated by the CFTC
The CFTC regulates the commodity futures and options market established by the Commodity Futures Trading Commission Act of 1974. It protects investors against abusive trade practices and fraud, as well as promotes efficient and competitive futures markets.
The CFTC also watches derivatives markets and exchanges for derivations from supply and demand that exist at any given time to reduce fraudulent and disruptive activity.
Though initially, the commodities futures market began with trading in agricultural commodities, including corn, cotton, and wheat, over time it has expanded to futures in fuel commodities (heating and crude oil, gasoline, and heating oil), metal commodities (gold, silver, and copper), and financial products (foreign currency, interest rates, and stock indexes).
Today the CFTC regulates a broad range of entities and actors, including:
- Foreign currency trading
- Futures commission merchants
- Derivatives clearing organizations
- Commodity pool operators
- Data depositories, execution facilities, and swap dealers
The Commodity Exchange Act gives the CFTC authority to:
- Regulate the reporting by professionals in the swap trading, options, and futures markets
- Monitor the markets
- Regulate the DCMs
- Review the terms and conditions of options or futures contracts
Some financial products, such as Bitcoin and other cryptocurrencies and single-securities futures, may fall under the purview of both the SEC and CFTC.
CFTC Regulations, Compliance and Enforcement
It is critical for companies under the jurisdiction of the CFTC to remain in compliance with the Commodity Exchange Act. This includes following all trading practice rules, registering where applicable, and not disrupting trade employing duplicity or collusion. The CFTC can enact sanctions such as criminal penalties, bans, and fines against anyone that disrupts trade, including registered traders and firms. It can pursue enforcement actions against organizations that:
- Run Ponzi schemes
- Employ manipulative commodities schemes
- Fraudulent pool commodities
- Market options and futures contracts improperly
The Dodd-Frank Wall Street Reform Act and Consumer Protection Act of 2010 includes provisions for the protection of whistleblowers and monetary awards to those whistleblowers who voluntarily provide original information regarding possible fraudulent activities to the CFTC.
Under Dodd-Frank, the original information is that which the Commission does not already have. It includes information from a person’s independent knowledge, so long as it not already generally known or available to the public.
For it to be considered voluntary, the information must come from individuals who have not already received a demand, inquiry, or request from Congress or other enforcement or regulatory agency. Absent these types of circumstances, a whistleblower report can be considered voluntary.
CFTC’s Whistleblower Program
Like the SEC’s Whistleblower Program, the CFTC’s goal is not only to incentivize whistleblowers with monetary rewards but also to protect those individuals courageous enough to come forward and report fraud. The program provides three forms of protection:
CFTC regulations reflect the provisions in the Dodd-Frank Reform Act to protect whistleblower confidentiality. It is generally considered the strongest among the federal whistleblower programs.
When an attorney represents the individual, even the CFTC may not learn of the whistleblower’s identity until the reward is paid.
Provisions in the Dodd-Frank Act expressly prohibit adverse actions against individuals who become whistleblowers. Individuals are provided with a private cause of action that may be brought in federal court to help them recover damages if they were discriminated or retaliated against, such as:
- Attorney’s fees
- Double back pay with interests
- Expert witness fees
- Litigation expenses
- Your reinstatement if discharged
How to File a CFTC Whistleblower Case
Commodity whistleblowers must complete and submit Form TCR to the CFTC’s Office of the Whistleblower by mail, fax, or the CFTC online portal. It is critical to be as detailed as possible and provide any documentary evidence you may have.
Supplemental pages can be submitted with the form so that the allegations can be thoroughly detailed. If you wish to file an anonymous claim, you must have an attorney who can submit the paperwork on your behalf once they have obtained proof of your identity.
Although the CFTC publishes its decisions denying or granting the rewards, the name of the whistleblower is not distributed with its rulings. If the sanctions are more than one million dollars, an Application for Award form must be completed to request payment.
How the CFTC Determines the Award Amount
Whistleblowers can receive an amount of no less than 10% and no more than 30% in cases in which the enforcement action results in sanctions that exceed one million dollars. Each case is unique, and the CFTC considers several factors that determine the award amount.
The Commission may increase the percentage depending on:
- The degree of assistance you provide
- Whether you participated in your employer’s internal compliance systems and to what extent
- The CTFC’s interest in deterring the type of violations taking place
- The significance of the information submitted to the Commission
- The success of the CFTC’s actions
The Commission may reduce the percentage of the award depending on:
- Whether you interfered with your employer’s internal reporting and compliance systems
- Whether you were culpable for the conduct you reported
- Whether you delayed reporting the violation
CFTC No-Action Letter
You can ask for agency guidance if you aren’t certain whether certain conduct is prohibited under CFTC regulations. Once reviewed, they will issue a no-action letter if there is a recommendation not to proceed with a certain action.
Contact CFTC Whistleblower Attorneys
A CFTC attorney with extensive knowledge and experience can help you build the best case and protect you from retaliation.
We represent corporate whistleblowers in Minnesota and nationwide who wish to remain anonymous and obtain maximum recoveries in whistleblower rewards and protection claims.
Contact us today for a free, confidential consultation.