The CFTC Whistleblower Office asked the public to report virtual currency fraud.
In a CFTC Alert, the agency warned the public about companies or individuals that commit fraud when soliciting investments in virtual currency. In the Alert, the agency instructed "victims of fraud and other market participants who observe misconduct committed by others" how they may qualify as whistleblowers.
The CFTC identified the following common types of fraud:
- price manipulation (e.g., pump-and-dump schemes);
- wash trading;
- trading futures, options or swaps on an unregistered domestic platform or facility;
- certain virtual currency marketing by unregistered persons; and
- supervision failures or fraudulent activity by virtual currency exchanges.
The CFTC stated that whistleblowers do not necessarily need to be "insider" app developers or employees, and clarified that victims of fraud and other market participants who have observed misconduct also may qualify for whistleblower awards.
Commentary / Christian Larson
In the regulatory jostle for jurisdiction over blockchain assets, this whistleblower alert is notable for the CFTC's statement that "[w]hen a virtual currency is used in a derivatives contract, or if there is fraud or manipulation involving a virtual currency traded in interstate commerce, CFTC enforcement of the [Commodities Exchange Act] comes into play."
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