From our recent survey of top SEC fraud recoveries this past year, we found it was not an especially standout year for the securities regulator in terms of big-dollar hauls. It was not necessarily a banner year for the Commodity Futures Trading Commission (CFTC) either in terms of its fraud recoveries. Only five of them brought in 9-digit amounts or higher.
But the Number 1 hit — the eye-popping $12.7 billion crypto fraud recovery from FTX — certainly made a splash. It was the largest CFTC investor fraud recovery ever and reminded the futures markets that the CFTC is alive and well and ready to take action when certain commodity market behavior crosses too far over the line. The Number 3 recovery also involved crypto-related fraud.
Three of the biggest SEC hits were also crypto-related, including the $4.5 billion recovery from Terraform, which was by far the SEC’s biggest recovery last year. However, most agree the CFTC and SEC will back off their crypto-related enforcement activity given the pro-crypto stance the Trump Administration has so openly promoted.
It remains to be seen how aggressive the CFTC will be in its other enforcement approaches. We expect the regulator to continue going after standard commodities violations, especially if newly anointed Acting Enforcement Director Brian Young holds on to the top enforcement post. With Young having most recently served as CFTC Whistleblower Chief, we also believe whistleblowers will continue to play a prominent role in CFTC enforcement.
Given the CFTC’s strict commitment to protecting the identity of its whistleblowers, we do not know for sure whether whistleblowers were involved in any of the CFTC’s top recoveries last year. But we do know since the CFTC Whistleblower Program was created under the Dodd-Frank Act in 2010, whistleblowers have played an increasingly critical role in CFTC enforcement.
And from the CFTC’s recently-released Annual Whistleblower Report, this past year was another strong year for whistleblowers, with the agency making roughly $42 million in awards and receiving 1,744 whistleblower submissions, the most in any year since the program’s inception. Most notably, the CFTC reported that roughly 42% of CFTC enforcement matters involve whistleblowers.
With all that, here is our listing of the Top 5 CFTC recoveries for 2024:
No. 1: FTX ($12.7B). On August 8, a New York federal court ordered FTX Trading to pay $12.7 billion in monetary relief to FTX customers and victims of the “massive fraudulent scheme” orchestrated by Samuel Bankman-Fried, his now-bankrupt FTX group of companies, and a core group of FTX insiders. It is the largest recovery in CFTC history. According to the CFTC: “FTX used age-old tactics to create an illusion that it was a safe and secure place to access crypto markets. But the basic regulatory tools, like governance, customer protections, and surveillance that exist to identify misconduct and ultimately prevent collapse, were simply not there.”
No. 2: ROFX ($225M). On May 14, a Florida federal court issued an order of default judgment against several individuals and their companies, all doing business as ROFX, ordering them to pay $225 million for foreign currency (forex) trading fraud. According to the court, the defendants obtained customers through the ROFX website and falsely claimed to trade forex using a highly successful automated trading robot with guaranteed coverage of losses. Instead, the defendants misappropriated all the customer funds, diverting them into their own bank accounts by wiring the funds to offshore entities with no connection to forex trading.
No. 3: Ikkurty ($210M). On September 3, an Illinois federal court entered a final judgment totaling roughly $210 million against Sam Ikkurty and his company Ikkurty Capital (doing business as Rose City Income Funds I and II and Seneca Ventures). According to the court’s findings, Ikkurty misrepresented to his fund participants the nature of his “crypto hedge funds” and the supposed “net profits” they would earn. According to the CFTC, “the defendants portrayed their programs as cutting-edge crypto and carbon investments when in reality they were plain, old-fashioned Ponzi schemes.”
No. 4: Blue Moon ($204M). On March 14, a Texas federal court ordered several individuals and their company Blue Moon Investments to pay roughly $204 million for (i) offering illegal, off-exchange binary options via an internet platform they operated and maintained, (ii) making material misrepresentations to customers concerning the level of risk of the binary options they offered, and (iii) manipulating the results of some trades to force customer losses and generate profits for themselves.
No. 5: JP Morgan ($200M). On May 23, JP Morgan Securities, a registered futures commission merchant and swap dealer, agreed to pay $200 million to settle CFTC charges of failing to supervise its business as a CFTC registrant, resulting in the company’s failure to capture billions of orders in its surveillance systems. The CFTC stressed its hope that the large settlement “sends a clear message that CFTC registrants must take appropriate steps to ensure, through testing and other means, that complete trade and order data direct from exchanges are being ingested into trade surveillance systems and that orders are being surveilled.”
* * *
If you would like to learn more about any of these settlements or what it means to be a CFTC whistleblower, please do not hesitate to contact us. We will connect you with an experienced member of the Constantine Cannon whistleblower team. You could be the next whistleblower to make the Top 5 list!
Read Top 5 CFTC Recoveries for 2024 at constantinecannon.com
Leave A Comment