The Commodity Futures Trading Commission awarded approximately $200 million to a whistleblower this month for his contribution” to the success of a CFTC action. This is the largest award of its kind to date and highly warranted given the market disruption and high-level fraud involved. The biggest scandals are witnessed by highly placed individuals who possess insider knowledge and who are frequently receiving large salaries. They must consider their own income when balancing the risks of whistleblowing and the possibility of termination. Although the CFTC maintains whistleblower confidentiality and its award decision is heavily redacted, the Wall Street Journal reports that the whistleblower tip involved alleged LIBOR manipulation at Deutsche Bank.
In other words, if Congress intended for major frauds to be revealed, there must be major rewards for the whistleblowers. Another fact is that high-level schemers hide their actions carefully, making it more difficult for governments and security agencies to learn of the wrongdoing without insider whistleblowers. Market manipulation such as front running, pump and dump, and insider trading are just a few examples that are widespread and undetected. absent agency willingness to render sizeable awards only a fraction of these activities will come to light.
The $200 million whistleblower award by the CFTC is a percentage of the CFTC’s own monetary recovery and that of another US regulator, as well as the recovery of a foreign regulator (apparently the UK Financial Conduct Authority, per the WSJ article). Although uncommon, this is consistent with Dodd-Frank’s statutory definition of “Related Action.”
JEFFREY A. NEWMAN REPRESENTS WHISTLEBLOWERS IN SEC AND CFTC CASES AND HE CAN BE REACHED AT JNEWMAN@NEWMANSHAPIRO.COM OR AT 617-823-3217.