Whistleblower’s Delay Costs Them in $4 Million CFTC Award

A whistleblower who failed to report illegal activity in a timely manner has been penalized by the Commodity Futures Trading Commission (CFTC), which has led to an uneven division of a $4 million award for providing information that helped secure a successful enforcement action. The award, which will be split between two claimants, reflects the significant impact of reporting delays.

The CFTC, along with many other federal agencies, runs whistleblower programs to encourage individuals to report unlawful activities. If the information provided meets certain criteria, whistleblowers are entitled to receive between 10 and 30 percent of any penalty paid as a result of the enforcement action, which may also be awarded to foreign regulators in some cases. Since its inception in 2014, the CFTC’s whistleblower program has disbursed $390 million in awards.

Due to the confidentiality requirements outlined in the Commodity Exchange Act, the names of the whistleblowers, along with specific case details and exact award amounts, are redacted to protect the privacy and safety of the individuals involved.

The case in question involved violations related to the integrity of commodities markets. The CFTC emphasizes the importance of timely reporting, as it can help “prevent further harm to customers or market participants and hold wrongdoers accountable to the fullest extent possible,” according to Ian McGinley, the CFTC’s director of enforcement.

Although there were five claimants in total, only two of them received a portion of the award, as they were the ones who provided the CFTC with specific, credible, and timely information. The agency noted in its order, which was disclosed Tuesday, that “the determination of appropriate percentages for whistleblower awards involves a highly individualized review of the facts and circumstances.”

The first claimant provided original information that led to the initial investigation and subsequent charges, and as a result, was awarded the larger share of the award. The second claimant, however, only tipped off the CFTC after the illegal activities had continued. While the second claimant sought a reconsideration of their lower award, the CFTC found the reduced amount to be appropriate due to their “unreasonably delayed reporting.”

“This is a perfect example of how the whistleblower rules allow for increased awards for timely initial reports and additional assistance while also providing a decreased award for those who unreasonably delay reporting,” said Brian Young, director of the CFTC’s Whistleblower Office.

The CFTC’s whistleblower program was established under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, with the goal of incentivizing individuals to report violations and contribute to the protection and integrity of financial markets.

By fLEXI tEAM