Largest-Ever Whistleblower Award Nets CFTC Tipster Almost $200 Million
On October 21, the Commodity Futures Trading Commission (CFTC) announced that it paid nearly $200 million to a whistleblower, a colossal award that is certainly the largest the CFTC has ever made, but also the largest award made under any federal whistleblower-reward program to a single whistleblower, including the False Claims Act.
The CFTC said the whistleblower’s tip provided important, “direct evidence of wrongdoing” and led to a successful enforcement action. It also assisted two related regulatory actions, one conducted by a U.S. federal agency and another by a foreign agency. The whistleblower was eligible for the award because the CFTC found a “meaningful nexus” between the information the whistleblower provided and the CFTC’s ability to obtain monetary sanctions.
As is its practice, the CFTC is not divulging the name of the bad actor about which the whistleblower provided information. But given the size of the award and prior reporting, there aren’t a lot of contenders.
According to the whistleblower’s lawyers, the whistleblower’s information related to manipulation of crucial financial benchmarks used by global banks to price fixed income futures, options, swaps, and other derivative products.
That sounds to us quite a bit like the London interbank offered rate or LIBOR. Between 2012 and 2018, the CFTC imposed penalties of over $3.2 billion on entities for manipulating LIBOR. But which member of the rogue’s gallery could it be?
The smart money is on Deutsche Bank, which paid the CFTC $800 million in 2015 to settle LIBOR-related manipulation charges, the largest fine the agency ever imposed. Notably, the CFTC’s announcement about Deutsche Bank mentioned related actions by the U.S. Department of Justice, which imposed a $775 million criminal penalty, as well as the United Kingdom Financial Conduct Authority, which fined Deutsche Bank about $313 million. All told, that amounts to about $1.9 billion.
News reports also finger Deutsche Bank as the likely target. Back in May, the Wall Street Journal reported on a potential $100 million-plus award for a Deutsche Bank whistleblower that threatened to destroy the CFTC whistleblower program. CFTC whistleblower awards are paid from a fund financed by sanctions fraudsters pay to the CFTC.
But the fund is capped at $100 million—a sum, the CFTC realized, that is not large enough to meet the scale of Deutsche Bank’s wrongdoing. As one commentator put it, “Deutsche Bank is such an unprecedented catastrophe that no one even 11 years ago could have predicted it would be forced to cough up so much in fines as to bankrupt a critical part of a federal agency.”
As we wrote about earlier, Congress had to step in with a funding fix, which President Biden signed into law in July. The bill, an amended version of the CFTC Fund Management Act, saved the CFTC whistleblower program from financial collapse.
The award is also notable because it is the first CFTC award that is based in part on fines that a foreign regulator imposed. That part of the whistleblower’s award drew a rare rebuke from Dawn DeBerry Stump, a CFTC commissioner appointed by former President Donald Trump.
Today’s blockbuster award demonstrates the power of the CFTC and other whistleblower reward programs to snuff out corruption and other corporate misdeeds that will not come to light unless whistleblowers are incentivized to come forward.
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