The Dodd-Frank Act, enacted in 2010, is dedicated to avoiding the financial misconduct which gave rise to America’s financial crisis of 2008. Under this Act, there is a provision focused on whistleblowers with original knowledge of fraud in the commodities trading industry.
What is commodities trading?
Commodities trading is better understood by first exploring the definition of commodities within the exchange markets. Commodities are products that are traded in their primary (i.e., non-manufactured) form. There are agricultural commodities like wheat, sugar, coffee or cocoa, and hard commodities like gold, rubber or oil.
Trading in commodities began many millennia ago with ancient cultures exchanging goods like rice or livestock. In the 1930’s, the Bureau of Labor Statistics began offering a Commodity Price Index detailing the current and history market values of dozens of commodities.
Today, trading in commodities is regulated by the U.S. Commodity Futures Trading Commission (the “Commission”).
How does a commodities trading whistleblower case progress?
A whistleblower case under the commodities trade provisions begins when an individual has original, first-hand information of trading fraud. Original information is that which is not public knowledge. It cannot derive from the media, a government report or court documents, unless the whistleblower is also the original source of that data. Also, the whistleblower cannot be an individual in a supervisory position over the entity allegedly engaging in fraudulent conduct.
If the whistleblower meets the above criteria, he can submit a Form TCR to the Commission for review. The initial submission may be anonymous, however, a whistleblower must eventually reveal his identity in order to receive an award. Under the rules, a whistleblower can only receive an award if the Commission is successful in recovering at least $1 million from the fraudulent parties. Once the amount is recovered, the whistleblower may receive between 10 and 30 percent of the overall take.
Recent commodities trading fraud case
Commodities trading fraud can strike at any time, and often takes of the form of over-inflated promises and guarantees of highly improbable rates of return. For instance, a recent case involving CitiGroup has resulted in allegations by the Commission of over-inflated ethanol values. The Commission has cited a former employee with defrauding a bank of over $42 million while employed in Citi’s commodities arm.
Contact a Whistleblower Attorney for More Information
If you have knowledge of possible inflated commodities prices or other types of fraud involving unmanufactured goods, a whistleblower attorney is the best person to speak to about your suspicions. For more information, contact Berger Montague today.