The Commodity Futures Trading Commission (CFTC) imposed over $2.5 billion in enforcement penalties in fiscal year 2022, according to its annual report.
The penalties were assessed through either restitution, disgorgement, or civil monetary penalties and were achieved through either settlement or litigation. Overall, the commission filed 82 enforcement actions involving fraud, manipulation, reporting, supervision, and misconduct, among other violations.
“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,” CFTC Chairman Rostin Behnam said. “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.”
Infractions related to digital assets accounted for about 20 percent of the overall cases. Among them, the commission Digitex Futures with illegally offering futures transactions on a platform that is not a designated contract market (DCM). They were also charged with attempting to manipulate the price of the Digitex Futures native token and failing to implement a Customer Identification and Anti-Money Laundering program.
Additionally, it charged a decentralized autonomous organization (DAO) with commodity pool fraud, among other violations, arising from the 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.
In addition, the CFTC found that 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. Tether was ordered to pay a civil monetary penalty of $41 million. Further, the commission charged the cryptocurrency trading platform, Bitfinex, with engaging in illegal, off-exchange retail commodity transactions in digital assets with U.S persons and operated as an FCM without registering as required.
Among other charges last fiscal year, the CFTC found the swap dealer and futures commission merchant (FCM) affiliates of 12 financial institutions committed recordkeeping and supervision violations. They imposed a total of $796 million in civil monetary penalties.
In addition, 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. This resulted in the swap counterparties collectively losing over $10 billion. Also, in another case, the CFTC alleged defendants defrauded at least 14,0000 retail forex customers worldwide and misappropriated at least $4.7 million of customer funds.
“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.” Acting Director of Enforcement Gretchen Lowe said. “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.”
Finally, the CFTC’s Whistleblower Program issued 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. Overall, total sanctions ordered in all whistleblower-related enforcement actions surpassed the $3 billion milestone.