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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?

SEC’s Gary Gensler believes AI can strengthen its enforcement regime

July 18, 2023 Coin Telegraph

Bias

The Securities and Exchange Commission chair highlighted market surveillance and other instances where agency staff could benefit from making greater use of AI.

Gary Gensler, the chair of the United States Securities and Exchange Commission, believes staff at its agency could benefit from greater use of artificial intelligence.

During a July 17 speech before the National Press Club, where he later broke his silence about the recent Ripple court ruling, Gensler listed several potential use cases of AI that could assist the regulator in its role as securities watchdog.

"We at the SEC also could benefit from staff making greater use of AI in their market surveillance, disclosure review, exams, enforcement, and economic analysis,” he said.

*SEC Chair Gensler speaking before the National Press Club on July 17. Source:* *SEC*

The SEC has hit up at least 54 cryptocurrency firms with enforcement actions between 2018 and the first half of 2023. The collapse of FTX in November was followed by a dramatic increase in the rate of these actions.

While Gensler didn’t provide more detail on how the agency could use AI, the SEC chair spoke highly of the technology and the positive impact that it can have on humanity on financial markets:

“AI opens up tremendous opportunities for humanity, from healthcare to science to finance. As machines take on pattern recognition, particularly when done at scale, this can create great efficiencies across the economy.”

“I believe it’s the most transformative technology of our time, on par with the internet and mass production of automobiles,” Gensler added.

Issues with AI still linger, says Gensler

Despite the overall positive sentiment, Gensler highlighted that many AI systems are filled with bias and deception, infringe on privacy rights and present several conflicts of interest.

On the issue of bias, Gensler said some predictive AI models reflect historical biases which makes the system less accurate and in some cases, lead to an entirely false prediction.

Gensler highlighted that he was even a victim of misinformation when a fake AI-generated text of his resignation began circulating on the internet.

Gensler added that conflicts of interest could arise when AI systems are trained to take into account the interests of the company as opposed to the interests of the customer. He added:

“That’s why I’ve asked SEC staff to make recommendations for rule proposals for the commission’s consideration regarding how best to address such potential conflicts across the range of investor interactions.”

He also believes the emergence of a few AI monopolies may shake up the economy and potentially play a role in a “future financial crisis.”

Read my full remarks from @PressClubDC's Headliners Luncheon:
— Gary Gensler (@GaryGensler) July 17, 2023

In a follow up interview with Yahoo Finance on July 17, Gensler said that the regulator will enforce action against culprits who use AI to defraud investors:

“Fraud is fraud. If a bad actor uses artificial intelligence to try to deceive the public, we’re authorized but also mandated by Congress to go after that,” he said.

“AI is already very much embedded in our capital markets,” SEC Chair @GaryGensler says, later adding: “These are rapidly changing times." pic.twitter.com/i0xuBNO2WE
— Yahoo Finance (@YahooFinance) July 17, 2023

Collect this article as an NFT to preserve this moment in history and show your support for independent journalism in the crypto space.

Magazine: AI Eye: ‘Biggest ever’ leap in AI, cool new tools, AIs are the real DAOs

SEC’s Gensler seeks $2.4B in funding to chase down crypto ‘misconduct’

March 30, 2023 Coin Telegraph

<div>SEC's Gensler seeks .4B in funding to chase down crypto 'misconduct'</div>

Budget

SEC Chair Gary Gensler says the regulator is spread thin and needs additional funding to keep up with the “increased complexity in the capital markets.”

United States Securities and Exchange Commission (SEC) chair Gary Gensler has thrown his support behind President Biden’s request to allocate a record $2.4 billion in funding for the regulator, highlighting the ongoing need to crack down on “misconduct” in the cryptocurrency industry.

In prepared testimony for the March 29 budget hearing with the House Appropriations Committee, Gensler said the additional funding was needed to keep up the pace of innovation, adding:

“Rapid technological innovation in the financial markets has led to misconduct in emerging and new areas, not least in the crypto space. Addressing this requires new tools, expertise, and resources.”

The additional funding would allow the SEC to hire 170 additional staff, most of whom would work within its enforcement and examination divisions, said Gensler.

The SEC chair noted that the prior year's budget increase allowed it to bring staffing levels above what it was in 2016 for the first time, but said the regulatory agency was still stretched thin, adding:

“As the cop on the beat, we must be able to meet the match of bad actors. Thus, it makes sense for the SEC to grow along with the expansion and increased complexity in the capital markets.”

Gensler again described crypto as the wild west, suggesting the nascent industry is “rife with noncompliance,” and that crypto investors were putting their “hard-earned assets at risk in a highly speculative asset class.”

According to Gensler, the regulator “received more than 35,000 separate tips, complaints, and referrals from whistleblowers and others in FY 2022,” which helped it bring more than 750 enforcement actions and “resulted in orders for $6.4 billion in penalties and disgorgement.”

30 of these actions were related to the crypto industry, which resulted in $242 million in monetary penalties and represents a 36% increase over the 22 actions announced in 2021.

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