The Commodity Futures Trading Commission issued a $200 million whistleblower award this week that is the largest whistleblower payout ever by the CFTC under its Dodd-Frank whistleblower program and is also the largest whistleblower award in the history of government whistleblower reward programs.
Since the CFTC is required by law to protect the whistleblower’s identity, it did not name the whistleblower nor the entity. In a press release, the CFTC said the record whistleblower reward went to an individual whose “specific, credible, and timely original information significantly contributed to an already open investigation and led to a successful enforcement action, as well as to the success of two related actions, by a U.S. federal regulator and a foreign regulator.”
The CFTC whistleblower award reportedly was made to an unnamed whistleblower who provided significant information and assistance to the CFTC and the UK in their investigations of Deutsche Bank for allegedly manipulating the Libor interest rate benchmark.
Deutsche Bank paid the US and the UK a total of roughly $2 billion to settle charges in 2015. It paid an additional $600 million to New York state to settle a related case.
The award bodes well for whistleblowers who go to the CFTC, a relatively small agency whose whistleblower program generally gets little attention. Given the agency’s extensive regulatory portfolio, which includes the derivatives market, large awards can be expected when a whistleblower provides critical information and assistance in major enforcement actions. Libor settlements are one example.
The $200 million reward is an acknowledgement of the crucial role that the whistleblower played in financial regulatory enforcement actions in two countries. Based on the award amount, it can be assumed that the CFTC and a foreign regulator collected a huge amount in penalties from the entity, reportedly Deutsche Bank, and stopped significant wrongdoing because of the whistleblower. This shows the great value of the CFTC whistleblower program for investors and the markets.
The record whistleblower reward will encourage more whistleblowers to step forward, particularly high-level company insiders with detailed knowledge of corporate wrongdoing who weigh the risks of losing their highly paid careers with the benefits of blowing the whistle. The CFTC has shown it will make large awards when its enforcement actions are huge.
History of largest whistleblower awards
The CFTC’s record-setting award is nearly twice the SEC’s largest whistleblower award given out under the Dodd-Frank Act. Last year, the SEC awarded $114 million to a whistleblower who alerted the SEC and another agency of wrongdoing and “provided substantial, ongoing assistance that proved critical to the success of the actions,” the SEC said.
The largest known SEC reward to international whistleblowers went to individuals represented by Phillips & Cohen: $37 million and $32 million.
The largest whistleblower award from a settlement in a False Claims Act case was for $100 million, which was shared by two whistleblowers represented by Phillips & Cohen. The largest award to a single whistleblower in a False Claims Act case was $96 million.
Before this award, the CFTC’s biggest whistleblower payout was $30 million. CFTC whistleblower awards total more than $300 million, including this recent award.
Largest whistleblower reward based on US and foreign government fines
The CFTC whistleblower award amount was based on US recoveries as well as those by an unnamed foreign regulator. However, CFTC Commissioner Dawn Stump opposed the CFTC’s decision to base part of the whistleblower award on recoveries by a foreign regulator.
Phillips & Cohen partner Erika Kelton, who represents whistleblowers in the US as well as in other countries, disagreed with Stump’s position.
“I think Commissioner’s Stump’s dissent is based on a misunderstanding of the Dodd-Frank Act, which makes ‘related case’ awards – including those brought by foreign regulators – mandatory, not discretionary,” Kelton said. “While the rules use the term ‘may,’ that language doesn’t obviate the mandatory language used in the law itself which created the CFTC whistleblower program.
“While Commissioner Stump might not feel that a related case award is a necessary incentive, Congress determined that such related case incentives are appropriate when they passed Dodd-Frank,” Kelton said.
How the CFTC whistleblower program works
The CFTC’s whistleblower program was established under the Dodd-Frank Act in 2010. The program offers whistleblowers rewards, confidentiality and employment protections for reporting commodity law violations.
CFTC whistleblower rewards range between 10% and 30% of the monetary sanctions collected by a CFTC action if they total over $1 million. Whistleblowers also are eligible for rewards based on sanctions collected in related enforcement actions, if there is a successful CFTC enforcement action.
Whistleblowers’ identities are kept anonymous and confidential, with certain rare exceptions. The Dodd-Frank Act prohibits employers from firing, harassing, demoting, suspending, threatening, or otherwise retaliating against whistleblowers who report potential commodity law violations to the CFTC.
If you are aware of possible violations of commodity law and would like to become a CFTC whistleblower, contact us for a free, confidential review of your case.