Financial Crime World

Record-Breaking $45 Million Whistleblower Awards Announced by CFTC in ISDAFIX Probe

Highest Aggregate Award since Inception of CFTC’s Whistleblower Program

On August 2, 2018, the United States Commodity Futures Trading Commission (CFTC) announced that it had granted multiple whistleblower awards totaling over $45 million. This represents the highest aggregate award since the inception of the CFTC’s whistleblower program in 2011.

Investigation into ISDAFIX Benchmark Manipulation

The CFTC did not disclose specific details about the investigations related to the awards, citing confidentiality protections for whistleblowers. However, an independent report suggests a possible link to the commission’s long-running investigation into the manipulation of the ISDAFIX benchmark.

Background: ISDAFIX and Benchmark Manipulation Probes

The CFTC’s investigation of the ISDAFIX benchmark followed the commission’s and other regulators’ investigations into LIBOR. These probes uncovered widespread manipulation and collusion among traders, resulting in over $3 billion in penalties paid and criminal proceedings, antitrust litigation, and successful class-action lawsuits.

Since then, the CFTC has also probed other benchmarks, including ISDAFIX and foreign exchange trading-based benchmarks, leading to six settlement orders against various banks totaling over $700 million. The allegations centered on traders’ attempts to manipulate these benchmarks by making false submissions and influencing final rates through market activity.

Significance and Implications for Companies

These awards demonstrate the strong incentives for individuals with knowledge of wrongdoing to report it to the CFTC. To capitalize on these incentives, companies must prioritize:

  • Robust internal reporting processes: Allow employees to report misconduct anonymously and ensure that reports are investigated promptly.
  • Compliance measures: Implement clear policies, procedures, and trainings aimed at preventing and detecting misconduct.
  • Clear escalation paths: Ensure that allegations are escalated quickly to the appropriate authorities.

The CFTC’s record-breaking award serves as a reminder for financial institutions to prioritize transparency and regulatory compliance. By investing in robust internal reporting processes and compliance measures, companies can prevent and detect misconduct, while also encouraging whistleblowers to come forward with valuable information.