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Record whistleblower award for the derivatives market

On Behalf of | Nov 10, 2021 | False Claims Act, Whistleblower Protection

On October 21, the Commodities Futures Trading Commission (CFTC) announced that it awarded nearly $200 million to a whistleblower. This is the largest award to a single whistleblower under the CFTC whistleblower program. According to the agency, the whistleblower’s specific credibility and timely original information significantly contributed to an open investigation, leading to successful enforcement action on the primary case as well as two related actions by a foreign regulator and another U.S. federal regulator. All told, monetary penalties exceed $3 billion.

What did they do?

It is common practice to protect the identity of the whistleblower and the entity facing the enforcement action, so there was no mention of the identities on the CFTC website press release. However, various news sources identify Deutsche Bank as manipulating the London Interbank Offered Rate (LIBOR) as part of the LIBOR Scandal, which came to light in 2012 but had roots going back as far as 2003. The bank also admitted to violating the Sherman Act by rigging the Yen LIBOR with other banks. Other regulatory penalties involved:

  • $800 million to the Commodity Futures Trading Commission
  • $600 million to the New York Department of Financial Services
  • $344 million to the U.K. Financial Conduct Authority.

Five other banks have already reached resolutions with the Justice Department. There are 12 individuals charged as part of the investigation. Three already pleaded guilty.

The impact on financial markets

The scandal fermented distrust in the global financial industry, particularly as it relates to LIBOR as a credible benchmark rate. LIBOR will be phased out by June 30, 2023, and its one-week and two-month USD LIBOR rates will no longer be published after December 31, 2021. The Secured Overnight Financing Rate (SOFR) will replace it.