Since the creation of its whistleblower program under the 2010 Dodd Frank Act, the Commodities Future Trading Commission (CFTC) has recovered over $1 billion from criminal and fraudulent activity due to whistleblowers’ assistance and paid over $120 million in whistleblower awards.
Now, the program is being threatened by its own success. As NWC Board Chair Stephen Kohn discussed in a National Law Review article, after a record-breaking number of whistleblower rewards granted in FY 2020, the CFTC has had to postpone the issuance of rewards – despite the legal requirement to do so.
This is due to a statutory limit on the amount of money that can be deposited into the CTFC’s Consumer Protection Fund (“Fund”). The Fund is used to compensate whistleblowers who provide original information that results in a successful prosecution and other essential expenses necessary to operate the CFTC’s whistleblower office. All of the money deposited into the Fund comes directly from sanctions paid by wrongdoers – not from taxpayers.
While the CFTC has recovered billions in sanctions from wrongdoers thanks to whistleblower assistance over the past decade, there is a cap of $100 million placed on deposits in the Fund. When the program was created under Dodd-Frank, this limit seemed reasonable, and for the first several years of the program, the cap created no issues. As Kohn notes, in the first 18 months of the CFTC program, only 58 individuals filed complaints with the CFTC.
However, since its creation, the program has seen massive growth. In FY 2020, more than 1,000 whistleblowers filed complaints regarding commodities fraud. Currently, between 30-40% of the CFTC’s anti-fraud enforcement’s ongoing investigations involve whistleblowers. This growth has not corresponded with an increase in the Fund due to the cap.
Now, the Fund has run out and the CFTC has started delaying the processing of whistleblower cases due to a lack of funds. This leaves commodities whistleblowers, many of whom have lost their jobs and careers, in an extremely precarious and uncertain position.
There is an emergency fix currently pending in Congress: the bipartisan Commodity Futures Trading Commission (CFTC) Fund Management Act (S.409).
CFTC Fund Management Act (S.409)
On February 24th, 2021, a bipartisan group of Senators, including Chuck Grassley (R-IA), Maggie Hassan (D-NH), Joni Ernst (R-IA), and Tammy Baldwin (D-WI), proposed legislation to ensure that the CFTC program can continue to pay whistleblowers.
The CFTC Fund Management Act would amend the Commodity Exchange Act (CEA) to increase the cap on the amount of money that can be deposited into the Fund, ensuring funds are available to compensate whistleblowers and continue the operations of the CFTC Whistleblower Office.
The CFTC strongly supports increasing this cap given the whistleblower program’s consistent success. Top CFTC officials have repeatedly iterated their support for whistleblowers and emphasized their importance in uncovering complex commodities crimes like spoofing, swaps, derivatives fraud, market manipulation, and more. On July 12, 2018, the then-Chairman of the SEC said: “The Whistleblower Program has become an integral component in the agency’s enforcement arsenal.”
Passing the Act is an essential first step in ensuring the Office of the Whistleblower has the funds to continue its outstanding work on behalf of whistleblowers and the public interest.
After its introduction, the Act was referred to the Agriculture Committee for review. It’s important this Committee supports the bill’s sponsors in their effort to pass the CFTC Fund Management Act – and quickly – to stop the financial crisis and ensure whistleblowers are paid in a timely manner as mandated under the Dodd-Frank Act. The alternative would be disastrous for the program.