When it comes to whistleblower provisions, the False Claims Act undoubtedly reigns as the most well-known, highly-publicized piece of legislation on the books today. However, there are several other industries enjoying similar anti-fraud protections and whistleblower provisions, including the commodities futures trading industry, protected by the lesser-known commodities futures trading whistleblower provisions contained within the 2010 Dodd Frank Act. These provisions provide whistleblowers with original information of fraud within the commodities futures trading markets the opportunity to step forward and bring their allegations to justice. Like the FCA, successful lawsuits involving commodities trading fraud could result in a reward for the whistleblower of up to 30 percent.
What is Commodities Futures Trading Fraud?
Before discussing commodities futures trading fraud, it may help to better understand the commodities futures trading industry and what it involves. Commodities are unmodified items available for trade on the open market, including crude oil, gold, copper, crops, or livestock. The “futures” aspect of the industry pertains to the typical situation in which traders and investors are making deals based on the future value of the product. These trades operate on a margin and investors are usually taking a much larger risk than with non-futures products or assets.
The Commodities Futures Trading Commission (“CFTC”) is tasked with detecting, investigating, and punishing fraud within this industry. Commodities trading fraud can occur in any number of ways, but typically involves the following scenarios:
- Promises of high growth or return on commodities accompanied by guarantees of extremely low risk;
- Options to pool money with other customers and investors;
- Foreign currency trading scams;
- “Ponzi” schemes perpetuated by investors who are not registered with the CFTC.
Changes for Commodities Whistleblowers in 2014
Since the implementation of the Dodd Frank Act, the CFTC and its whistleblower department have experienced unprecedented growth and expansion. Currently, the CFTC has jurisdiction to control and oversee a $400 trillion market, all with an annual budget of just $215 million.
Whistleblower reports to the CFTC were a measly 58 in fiscal year 2012, but jumped to 138 in fiscal year 2013. What’s more, the CFTC plans to make it’s first-ever whistleblower reward this year, which it hopes will incentivize others to come forward with information about commodities fraud. It has also gained increased notoriety through its concerted efforts against some of the largest Wall Street actors on record. Currently, the CFTC is helping to investigate the Bank of Scotland and Barclay’s, among others, pursuant to allegations of the manipulation of foreign exchange markets. Specifically, these two financial institutions (as well as several others) are facing accusations that they manipulated the London benchmark gold fix — a centuries-old standard used by traders in the gold futures industry. The allegations surfaced after several investigators noticed unusual trading patterns in conjunction with a private meeting held between the banks. The timing of patterns immediately triggered thoughts of collusion — however all involved have vehemently denied the claims as “without merit.”
At first blush, commodities trading fraud may seem far-removed from your everyday life, and you may be wondering how you could possibly have information regarding this industry. However, scams are not limited to professional banking corporations or futures trading professionals. In fact, many scammers exploit certain social groups to pool their money in return for a huge payday which never actually occurs. If you believe you or a loved one has been scammed involving any one of the commodities categories listed above (e.g., currency, gold, crops), you are encouraged to contact an experienced whistleblower attorney today.