Release Number 8613-22
CFTC Releases Annual Enforcement Results
October 20, 2022
Washington, D.C. — The Commodity Futures Trading Commission today released the agency’s enforcement results for Fiscal Year 2022 that demonstrates its continued commitment to protecting customers and ensuring market integrity. In FY 2022, the CFTC obtained orders imposing over $2.5 billion in restitution, disgorgement and civil monetary penalties either through settlement or litigation. In the agency’s efforts to prevent fraud, manipulation, reporting, supervision and misconduct related to digital assets, the CFTC filed 82 enforcement actions and continued to devote significant resources to litigating complex cases and achieved several litigation successes during the fiscal year.
“In the face of unprecedented financial market conditions directly impacting American consumers, emerging technological disruption, and growing retail investor participation, the CFTC continues its unwavering commitment to a robust enforcement program ensuring the markets we oversee are open, transparent, fair and competitive,” said Chairman Rostin Behnam. “This FY 2022 enforcement report shows the CFTC continues to aggressively police new digital commodity asset markets with all of its available tools. I personally thank the Enforcement Division’s hardworking and dedicated leadership team and staff.”
“As evidenced by the FY 2022 enforcement results, whether measured by the number of new enforcement actions filed or the many hard-fought successful litigations, the Enforcement Division staff’s dedication to protecting customers, ensuring the integrity of the markets, and holding market participants and registrants accountable is unwavering.” said Acting Director of Enforcement Gretchen Lowe. “The Enforcement Division demonstrated its professionalism, expertise and skill through the breadth, complexity and importance of the investigations conducted, the cases filed, and the successes achieved.”
Below are performance highlights from FY 2022. In addition, Addendum A includes a table summary of the FY 2022 actions; a list of all FY 2022 actions; and a list of those FY 2022 actions that involved digital asset-related conduct.
Division of Enforcement Performance Highlights
The Division of Enforcement (DOE) FY 2022 performance is reflected in the enforcement actions it filed and the litigation and cooperative enforcement successes it achieved.
The CFTC’s 82 enforcement actions included the following, among others:
Digital Asset-Related Actions
In Fiscal Year 2022, the Commission brought 18 actions involving conduct related to digital assets, representing more than 20% of all actions filed during FY 2022. Through those actions, the Commission charged manipulation of the Digitex Futures native token; charged a decentralized autonomous organization (DAO); addressed failures to register or seek designation as a designated contract market (DCM), swap execution facility (SEF) or futures commission merchant (FCM); and took on fraud, including a $1.7 billion fraudulent scheme.
- The CFTC charged defendants, who operated a digital asset exchange under the trade name “Digitex Futures,” with illegally offering futures transactions on a platform other than a DCM and also with attempting to manipulate the price of the Digitex Futures native token and failing to implement a Customer Identification and Anti-Money Laundering program. [Press Release 8605-22]
- The CFTC charged defendants with commodity pool fraud, among other violations, arising from defendants’ acceptance of at least 29,421 Bitcoin—with a value of over $1,733,838,372—from approximately 23,000 non-ECPs from the United States. [Press Release 8549-22]
- The CFTC charged a DCM with, directly and through others, making false or misleading statements of material facts, or omitting to state material facts, to the CFTC during an evaluation of the potential self-certification of a bitcoin futures contract. The proposed bitcoin futures contract was to be settled by reference to the spot bitcoin price on the relevant day as determined by an auction held on Gemini’s digital asset trading platform (Gemini Bitcoin Auction). [Press Release 8540-22]
- The CFTC charged respondents who designed, deployed, marketed, and made solicitations concerning a blockchain-based software protocol that accepted orders for and facilitated margined and leveraged retail commodity transactions (functioning similarly to a trading platform). The Commission found they unlawfully engaged in activities that could only lawfully be performed by registered FCMs and failed to adopt a customer identification program as part of a Bank Secrecy Act compliance program, as required of FCMs. [Press Release 8590-22]
- The CFTC found the cryptocurrency trading platform, Bitfinex, engaged in illegal, off-exchange retail commodity transactions in digital assets with U.S persons and operated as an FCM without registering as required.
- The CFTC also found Tether Holdings Limited, and others, made untrue or misleading statements and omissions of material fact in connection with the U.S. dollar tether token (USDT) stablecoin. The order requires Tether to pay a civil monetary penalty of $41 million. [Press Release 8450-21]
- The CFTC charged defendants with illegally offering leveraged and margined retail commodity transactions in digital assets, such as Ether, DAI, and others; engaging in activities only registered FCMs can perform; and failing to adopt a customer identification program as part of a Bank Secrecy Act compliance program, as required of FCMs. [Press Release 8590-22]
Manipulative and Deceptive Conduct and Spoofing
- In its largest benchmark manipulation case to date, the CFTC found that an energy and commodities trading firm, engaged in manipulation and foreign corruption in the U.S. and global oil markets, including manipulation or attempted manipulation of four U.S. based S&P Global Platts physical oil benchmarks and related futures and swaps. The CFTC ordered the firm to pay $1.186 billion, which consists of the highest civil monetary penalty ($865,630,784) and highest disgorgement amount ($320,715,066) in any CFTC case. [Press Release 8534-22]
- CFTC charged defendants engaged in cross-market and single market spoofing involving CBOT soybean futures and options on soybean futures. [Press Release 8514-22]
- The CFTC brought several actions finding spoofing by respondents in a number of different markets, including gold and silver futures, CME Natural Gas (NG) and Reformulated Blendstock for Oxygenate Blending Gasoline futures, and Treasury futures. [Press Releases 8568-22, 8577-22, 8595-22, and 8595-22]
Recordkeeping and Supervision
- The CFTC found the swap dealer and futures commission merchant (FCM) affiliates of 12 financial institutions committed recordkeeping and supervision violations and imposed a total of $796 million in civil monetary penalties. Specifically, the 12 orders find the swap dealer and/or FCM in question, for a number of years, failed to stop its employees, including those at senior levels, from communicating both internally and externally using unapproved communication methods, including messages sent via personal text, WhatsApp or Signal. [Press Releases 8470-21 and 8599-22]
Violations by Registered Entities
- The CFTC found a registered DCM committed multiple violations, including failure to conduct controls testing and sufficient internal and external penetration testing; failure to conduct adequate enterprise technology risk assessments; options and swaps reporting violations; false statements to the Commission; and violation of a DCM Core Principle that among other things, contains requirements relating to the reliability, security, and adequate scalable capacity of operations and automated systems. [Press Release 8603-22]
- The CFTC found a registered DCM failed to obtain required written acknowledgment letters from a depository stating the depository was informed that funds deposited are customer funds being held in accordance with the Commodity Exchange Act (CEA) and restrict the use of such funds, among other things. [Press Release 8443-21]
- The CFTC found a registered SEF failed to comply with the CFTC 15-second delay requirement for certain required transactions on a SEF order book. [Press Release 8601-22]
Misappropriation of Material Non-Public Information
- The CFTC charged an employee with misappropriating confidential natural gas block trade order information from his employer and directing natural gas block trades to a brokerage firm in exchange for a share of the brokerage commissions charged to his employer for these trades. The complaint also charged the employee with making false statements to the CFTC. [Press Release 8490-22]
- The CFTC charged an introducing broker (IB) and associated person (AP) with misappropriation of block order information and unauthorized trading. The CFTC alleged the IB brokered trades without customers' knowledge or consent; while the AP traded on the opposite side of brokerage customers, intentionally offered non-true market prices, and misled customers to believe they were negotiating and trading against third parties. [Press Release 8451-21]
- The CFTC charged defendants for receiving tipped confidential block trade order information belonging to an energy company from a trader at that company, and in turn trading on the basis of this information, including entering into non-arm’s length, fictitious block trades in natural gas futures on the basis of this information. The CFTC alleged the scheme generated over $1.5 million in trading profits, which the defendant shared with both the energy company trader and the broker involved in the scheme. [Press Release 8468-21]
Swaps Reporting and Swap Dealer Business Conduct
- The CFTC found a provisionally registered swaps dealer (SD) committed swaps reporting failures; failed to comply with SD Business Conduct Standards when it failed to disclose to its swaps counterparties certain material information; and committed a failure-to-supervise violation. [Press Release 8501-22]
- The CFTC found a provisionally registered SD committed swaps reporting violations; adjusted daily mark disclosures being made to the relevant swap counterparties, contrary to the requirements of the CEA and CFTC regulations; and committed a failure-to-supervise violation. [Press Release 8552-22]
Other Enforcement Actions: Fraud, Registration, Reporting, Wash Trading, Position Limit Violations
- The CFTC charged a hedge fund and its CFO with engaging in a scheme to provide false or misleading material information and failing to provide such material information to swap counterparties of a private fund it managed, resulting in the swap counterparties collectively losing over $10 billion. [Press Release 8520-22]
- In a sweep, the CFTC filed five enforcement actions charging five entities with operating as unregistered FCMs. The CFTC alleges that all the respondents claim to be one of the leading platforms offering binary options, forex and spreads and further claim to be regulated by the CFTC. [Press Release 8589-22]
- The CFTC alleged defendants defrauded at least 14,0000 retail forex customers worldwide and misappropriated at least $4.7 million of customer funds. [Press Release 8477-21]
- The CFTC found that a state-owned entity and its affiliate engaged in violations involving ICE Cotton No. 2 futures, including wash trading violations, position limit violations, and reporting failures. [Press Release 8592-22]
The CFTC’s FY 2022 litigation success is further reflected in the following results:
- After a 5-day trial, the CFTC won a jury verdict against a portfolio manager finding he engaged in fraud when he misrepresented how he managed risk in the fund. [Press Release 8515-22]
- After a 5-day trial, the CFTC won a verdict finding a block trade broker and AP liable for secretly taking the other side of their customers’ orders without consent 65 times and disclosing their customers’ confidential order information, and finding the broker liable for failure-to-supervise and recordkeeping violations. The jury awarded a total of $7.5 million in civil monetary penalties. [Press Release 8574-22]
- Two defendants, charged in connection with a fraudulent forex and digital asset scheme, settled mid-trial as the CFTC presented its evidence against the defendants. The settlement order requires the defendants to pay $1.2 million in restitution and a $600,000 civil monetary penalty. [Press Release 8510-22]
- The CFTC won on summary judgment in an enforcement action, charging defendants with engaging in a fraudulent scheme involving an options trading program. The U.S. District Court ordered defendants to pay restitution and disgorgement totaling more than $6 million. [Press Release 8190-20]
Cooperation with Criminal and Regulatory Authorities
To effectively protect markets, participants, and customers, the CFTC continued its emphasis on coordination and parallel actions with criminal authorities and regulatory partners domestically and internationally. This was critical to deterring violators, punishing misconduct, preserving market integrity, and protecting market participants.
Illustrative of these efforts was the filing of a joint enforcement action by the CFTC and 27 state securities regulatory agencies that are members of the North American Securities Administrators Association (NASAA) charging a precious metals dealer and its owner for orchestrating a $68 million fraudulent scheme targeting elderly persons nationwide. [Press Release 8489-22]
The Whistleblower Program’s importance to the DOE continued to grow in terms of leads, successful enforcement actions, and whistleblower awards. In FY 2022, the CFTC’s Whistleblower Program made history by issuing a record-breaking award of nearly $200 million to a single whistleblower, the largest whistleblower award ever granted under the Dodd-Frank Act by either the CFTC or Securities and Exchange Commission. With that award and others issued during FY 2022, the total sanctions ordered in all whistleblower-related enforcement actions surpassed the $3 billion milestone. [Press Release 8453-21]
DOE Task Forces
The CFTC also continued to utilize specialized DOE task forces in complex and developing program areas to ensure consistency, identify best practices, and develop new approaches and ideas based on lessons learned. These task forces focused on seven substantive areas: 1) Spoofing and Manipulative Trading; 2) Digital Assets; 3) Insider Trading and Protection of Confidential Information; 4) Bank Secrecy Act; 5) Swaps; 6) Corruption; and 7) Romance Scams.
[See Addendum A under Related Links]