CFTC pays whistleblowers $16M this year for mostly crypto tips

October 31, 2023 Coin Telegraph

CFTC pays whistleblowers M this year for mostly crypto tips

Awards

Two of the CFTC’s crypto tipsters scored $15 million alone which brought successful enforcement cases for the regulator.

The United States commodities regulator has paid $16 million this year to whistleblowers who gave information leading to successful enforcement actions with a majority of the tips involving crypto.

In an Oct. 31 statement, Commodity Futures Trading Commission (CFTC) commissioner Christy Goldsmith Romero said most of the tips received this year involved crypto which she claimed was “an area that continues to have pervasive fraud and other illegality.”

Very proud of these offices and their outsized results. As a former IG, I know firsthand how important whistleblowers
are. The CFTC could not fully protect customers and markets w/o them. Click to read about the highest # of tips, crypto tips & environmental fraud tips. https://t.co/C4I9tgnxRU
— Commissioner Christy Goldsmith Romero (@CFTCcgr) October 31, 2023

Two whistleblowers received $15 million alone for their information which led the CFTC to successful enforcement cases in September — however, the regulator didn’t delve into the nature of those cases in its statement at the time.

Romero said whistleblowers are vital to mitigate commodities fraud and that the CFTC wouldn’t be able to “fully protect” customers and markets without them:

“Whistleblowers help identify fraud and other illegality, interpret key evidence, and save considerable Commission resources and time. The faster we can stop fraud, the more we can protect customers from harm.”

Romero acknowledged the efforts of CFTC’s Office of Customer Education and Outreach which teaches people to spot, avoid and report cryptocurrency fraud.

“With the rise of crypto, more retail customers have come under the CFTC’s jurisdiction,” Romero said.

The CFTC has doled out almost $350 million since the program started in 2014. It’s led to over $3 billion in enforcement sanctions ordered in cases tipped off by whistleblowers.

The CFTC won a record $3.4 billion penalty payment in a Bitcoin-related fraud case in April and won its case against Digitex CEO Adam Todd in July who was ordered to pay $16 million in penalties.

In April, Romero iterated that managing the risks associated with cryptocurrency would be crucial to upholding market integrity, national security and financial stability.

She’s advocated integrating stronger identity verification measures saying it would minimize illicit finance in the cryptocurrency market.

As the bear market deepens, more crypto companies will have to lay off employees to keep the lights on.

This creates a new risk: disgruntled former employees often become whistleblowers, especially if they have valuable intel that entitles them to an SEC or CFTC bounty reward.
— Jake Chervinsky (@jchervinsky) December 29, 2018

Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?

Bankman-Fried ‘100%’ supports knowledge tests for retail derivatives traders

October 17, 2022 Coin Telegraph

CFTC

The FTX founder said a knowledge test for derivative retail customers “could make sense” but it doesn’t need to be specific to crypto.

The founder and CEO of cryptocurrency exchange FTX, Sam Bankman-Fried has backed the idea of knowledge tests and disclosures to protect retail investors but said it shouldn’t just be crypto-specific.

Bankman-Fried tweeted his thoughts in response to an idea floated by the Commodities Future Trading Commission (CFTC) commissioner Christy Goldsmith Romero on Oct. 15, saying the establishment of a “household retail investor” category for derivatives trading could give greater consumer protections.

Romero said due to crypto, more retail investors are entering the derivatives markets and called for the CFTC to separate these investors from professional and high-net-worth individuals and have “disclosures written in a way that regular people understand or could be used when weighing rules on the use of leverage.”

Derivatives trading is when traders speculate on the future price of an asset, such as stock, commodities, fiat currency, or cryptocurrency through the buying and selling of derivative contracts, which can involve leverage.

The FTX founder said he “100%” agrees with mandating disclosures and knowledge tests for all Future Commissions Merchants (FCMs) and Designated Contract Markets (DCMs) who face retail traders, adding it “could make sense.”

He added however that it doesn’t “necessarily make sense” for the disclosures and tests to be specific to cryptocurrencies, suggesting these should apply to all derivative products.

DCMs are CFTC-regulated derivate exchanges on which products such as options or futures are offered which can only be accessed through an FCM, which accepts or solicits buy and sell orders on futures or futures options contracts from customers.

Bankman-Fried’s comments come as FTX.US, FTX’s United States-based entity, looks to launch cryptocurrency derivatives trading and the exchange has already created a knowledge test that could be used for its platform according to Bankman-Fried.

The CFTC is ramping up its efforts to become the regulator of choice for the U.S. crypto market as calls for regulatory clarity become more persistent.

On Sept. 27 CFTC Commissioner Caroline Pham said the regulator should create a crypto retail investor-focused office to expand its consumer protections, the proposed office would be modeled off a similar office at the Security and Exchange Commission (SEC).

SEC boss worries crypto bill undermines financial protections

June 15, 2022 Coin Telegraph

CFTC

A provision in the bill gives authority over some cryptocurrencies to the Commodity Futures Trading Commission (CFTC), with the agency head saying it cares about having “rigorous oversight of markets.”

United States Securities and Exchange Commission (SEC) Chairman Gary Gensler said he’s worried that a proposed bill to create a regulatory framework for cryptocurrencies could weaken investor protections in the traditional financial market.

Speaking at The Wall Street Journal’s CFO Network Summit on June 14 Gensler was asked his thoughts regarding a recent bill introduced on June 7 by Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY).

He responded saying “we don't want to undermine the protections we have in a $100 trillion capital market,” adding:

“We don't want our current stock exchanges, mutual funds, or public companies to, sort of inadvertently by a stroke of a pen, say ‘you know what, I want to be non-compliant as well, I want to be outside of this regime that I think has been quite a benefit to investors and economic growth over the last 90 years.’”

The bipartisan Lummis-Gillibrand “Responsible Financial Innovation Act” aims to address many facets of crypto regulation such as tax treatment of digital assets, stablecoins, and agency jurisdiction.

One provision of the bill gives “clear authority” to the Commodity Futures Trading Commission (CFTC) over digital asset spot markets, Gensler has long been adamant in declaring most cryptocurrencies are securities, subject to the SEC’s authority.

The Senators have mostly agreed with Gensler’s point, saying some altcoins would likely be considered securities under the proposed law, with Bitcoin (BTC) and Ethereum (ETH) considered commodities.

At the summit, Gensler said the SEC wasn’t looking to extend its jurisdiction and that some cryptocurrencies are already under the jurisdiction of the agency since they qualify as being a security.

“We’re just looking out for the retail public […] these tokens are being offered to the public, and the public is hoping for a better future. That’s the characteristics of an investment contract.”

Meanwhile CFTC commissioner Christy Goldsmith Romero — who says she hasn’t yet read the Lummis-Gillibrand bill — welcomed regulatory action by Congress when speaking at an event on June 14.

Romero, also a former senior counsel in the SEC's enforcement division, was asked if the view that the CFTC was a more laissez-faire regulator in comparison to the SEC was accurate.

“No, not at all […] they're actually pretty similar,” she said, adding that the CFTC has brought multiple enforcement actions in the crypto space and each agency cares about having “rigorous oversight of markets.”

Explaining the differences she's witnessed, Romero said the CFTC has allowed more cryptocurrency products to trade on its regulated exchanges with 18 products trading across 11 regulated entities:

“What that means is that the CFTC is pretty experienced and how to regulate trading in this market, and that's really, really helpful as we move forward. It's still going to take cooperation and coordination with the SEC, I'm 100% committed to that, that’s my former home.”

Christy Goldsmith Romero