frame_main_header_title
  Home / News / Court cases / Largest whistleblower award to date for commodity fraud frame_main_breadcrumb_about frame_main_breadcrumb_contact    
 
22 OCTOBER 2018
Keep up to date with developments in fraud and money laundering compliance, regulation and developments. Only £295 for a full year's access and six printed newsletters.

Subscribe now

PDF Print
Tuesday, 31 July 2018 14:27
Largest whistleblower award to date for commodity fraud
The Commodity Futures Trading Commission (CFTC) has announced its largest whistleblower award to-date in a commodity fraud case.  It has issued “an award of approximately US$30 million to a whistleblower who voluntarily provided key original information that led to a successful enforcement action”

The failuire by New York JPMorgan Chase & Co.to properly inform some rich clients about conflicts of interest resulted in this record US$30 million whistleblower award by US futures regulators.

The Commodity Futures Trading Commission will pay out that amount for tips received in the case, in which the bank didn’t properly disclose that it was steering asset-management customers into investments that would be profitable for the bank, according to reports.

JPMorgan agreed in December 2015 to pay a record US$367 million asset-management settlement. That included US$100 million that went to the CFTC, described as a US$40 million monetary penalty and US$60 million in disgorgement. The bank agreed to pay the SEC an additional US$267 million.

Of the CFTC’s portion, US$30 million will go to one applicant, according to a letter this week sent to a total of five applicants, the person said, asking not to be identified because the matter isn’t public.
The other four applied too late or hadn’t helped investigators, according to the person, who reviewed the agency’s letter.

The award would be the CFTC’s fifth since its first whistleblower award five years ago, eclipsing a US$10 million award the agency granted in 2016. It’s just the CFTC’s second in excess of US$1 million.
The CFTC didn’t respond to requests for comment. Elizabeth Seymour, a spokeswoman for JPMorgan, declined to comment.

The SEC, in a preliminary decision in July, informed six whistleblower applicants that one of them would receive US$48 million and a second would get US$13 million. The others didn’t get any award. The SEC’s previous record of US$30 million was paid to an anonymous whistleblower in 2014.

Edward Siedle, a former SEC lawyer based in Florida acknowledged he acted as a whistleblower in obtaining the preliminary award determinations from the CFTC and from the SEC for the larger of its two awards.

The SEC, through spokeswoman Judith Burns, declined to comment.

“If the CFTC has granted an award, the individual or individuals who received it deserve every dime,” said Johnny Burris, a former financial adviser for JPMorgan with a whistleblower retaliation claim against the bank pending before an administrative law judge. “The hardships whistleblowers deal with are almost unimaginable.”

Burris acknowledged applying for an SEC whistleblower award related to its JPMorgan settlement but declined to say whether he had received one or was part of the CFTC proceedings.
Once the CFTC makes a preliminary determination, applicants have 60 days to appeal.

Under the Dodd-Frank Act of 2010, the SEC and CFTC operate separate whistleblower programs. Each can provide claimants between 10 per cent and 30 per cent of recoveries, based on the value of the information provided.

JPMorgan, the largest U.S. bank by assets, has acknowledged disclosure lapses in informing wealth-management clients that it preferred to invest their assets in hedge funds and mutual funds managed by an affiliate and thirdparty funds that shared their fees with the bank. JPMorgan said the omissions in its communications were unintentional and that it has since enhanced its disclosures.

The statement continues: “This is a major breakthrough for whistleblower protections.  The CFTC has been slow in processing and granting awards for whistleblowers.  Today’s US$30 million award is good news for whistleblowers who expose frauds in the trillion-dollar commodities markets,” said Stephen M. Kohn, a leading whistleblower attorney and the pro bono Executive Director of the National Whistleblower Center.

In light of this award, the Chairman of the CFTC, J. Christopher Giancarlo, issued the following statement: “The Whistleblower Program has become an integral component in the agency’s enforcement arsenal.   We hope that an award of this magnitude will incentivize whistleblowers to come forward with valuable information and provide notice to market participants that individuals are reporting quality information about violations of the Commodity Exchange Act [CEA].”

James McDonald, Director of the CFTC Division of Enforcement, stated: “Whistleblower submissions have become a significant part of our enforcement program, allowing us to pursue violations we might otherwise have been unable to detect.  That’s one reason why we’ve worked hard to expand our Whistleblower Program, including by increasing the protections afforded to whistleblowers that come forward.  I expect the Whistleblower Program to contribute even more substantially to our enforcement efforts going forward.”

The CFTC’s Whistleblower Program, established as part of the Dodd-Frank Act, pays monetary awards to eligible whistleblowers who voluntarily provide the CFTC with original information on violations of the Commodity Exchange Act that leads to a successful enforcement action resulting in monetary sanctions exceeding $1,000,000.   Rewards under the program are mandatory for qualified whistleblowers, and must be paid in the range of 10-30% of the collected proceeds.


 
Do you have a fraud early warning system? SUBSCRIBE to keep informed of the latest card, financial fraud and money laundering issues.

Fraud links