Cryptocurrency Whistleblower Receives $1 Million Award from CFTC

On August 8, the CFTC announced a $1 million whistleblower award to an individual whose information and assistance led to an enforcement action connected to digital assets markets.

Key Takeaways

• The awarded whistleblower “provided sufficiently specific and credible information that assisted the CFTC in bringing a successful action.”
• Qualified CFTC whistleblowers are eligible to receive awards of 10-30% of the monetary sanctions collected in the enforcement action connected to their disclosure.
• Overall, the CFTC Whistleblower Program has awarded approximately $380 million to whistleblowers.

On August 8, the U.S. Commodity Futures Trading Commission (CFTC) announced that it had issued a $1 million whistleblower award to an individual who voluntarily provided original information which led to a successful enforcement action involving digital asset markets.

Through the CFTC Whistleblower Program, qualified whistleblowers whose disclosures lead to successful enforcement actions are eligible to receive monetary awards of 10-30% of the funds collected in the action.

In this case, the CFTC notes that the whistleblower’s tip “was critical to the success of the Covered Action, as it formed the basis for the Division commencing its investigation into the Company.”

As part of the whistleblower program’s anonymity and confidentiality protections, the CFTC does not disclose any potentially identifying information about whistleblowers, including information on the case they assisted in. However, the CFTC does note that the case “connected to digital asset markets” and involved “improper trading that was unknown to the CFTC.”

“Identifying unlawful conduct in the digital asset marketplace is a major priority for the CFTC, especially as everyday Americans are increasingly victimized by digital asset scams,” said Director of Enforcement Ian McGinley. “During the last fiscal year, digital asset cases accounted for almost 50% of the CFTC’s docket, and the majority of whistleblower tips that year were related to digital assets.”

“Whistleblowers have increasingly played a significant role in the CFTC’s enforcement actions in the digital assets space,” added Whistleblower Office Director Brian Young. “Here, the whistleblower provided sufficiently specific and credible information that assisted the CFTC in bringing a successful action.”

CFTC Whistleblower Program and Cryptocurrency Fraud

As McGinley and Young both highlight, the CFTC Whistleblower Program plays a crucial role in crypto regulation.

In 2019, the CFTC posted a whistleblower alert to “inform members of the public about how they may make themselves eligible for both financial awards and certain protections while helping stop fraud and manipulation relating to virtual currencies.”

Since then, crypto whistleblowers have flocked to the program, with a majority of tips over the past two years relating to crypto fraud.

CFTC Whistleblower Program

According to the CFTC, “roughly 30 percent of all CFTC enforcement investigations stem from whistleblowers.” Overall, the CFTC Whistleblower Program has awarded approximately $380 million to whistleblowers and whistleblower-assisted cases have allowed the agency to recover nearly $3.2 billion dollars from fraudsters.