ABA Commodities Enforcement Panel Tackles Spoofing, Whistleblowers, and Crypto

On the first day of the ABA’s White Collar Crime Conference, Aitan Goelman moderated a panel with Avi Perry of the DOJ Criminal Division’s Fraud Section, Manal Sultan of the CFTC, and private practitioners Christian Kemnitz and Anne Termine.

The Fraud Section recently formed a unit to focus on fraud and spoofing in the commodities markets, which Perry leads. Perry explained that the unit isn’t focused on “ticky-tack” cases, but instead aims for cases with real impact on victims or on the integrity of the market. Perry discussed lessons learned from past spoofing trials, including United States v. Flotron, which ended in an acquittal. As an example of such lessons, Perry noted the need to obtain greater corroboration of immunized witnesses’ testimony as well as to take the necessary time to investigate complex cases.

Sultan discussed the CFTC’s current enforcement efforts. Despite active enforcement, spoofing has not stopped, said Sultan, but spoofing has sometimes taken different forms because spoofers constantly are trying to outsmart the market. The CFTC recently announced a record-breaking whistleblower award of $200 million and expects more awards to go out. She emphasized that the CFTC welcomes all tips, complaints, and referrals, and is happy to pay awards for good leads. The CFTC has also published Staff Guidance on Recognition of Self-Reporting, Cooperation, and Remediation, which provides greater transparency on the circumstances under which the CFTC might reduce penalties.

Finally, the panel discussed cryptocurrencies. In the past several years, the CFTC has clearly articulated its position that cryptocurrencies are commodities. But, more recently, SEC Chairman Gary Gensler has jumped into the fray, stating that cryptocurrencies also can be securities. The panel reached no consensus on which agency might be a greater threat to crypto market participants, but were quick to note that, when it comes to crypto-related enforcement, we all can be sure that the IRS would get its share. Perry added that cryptocurrency enforcement is also a high priority for DOJ, pointing out that Deputy Attorney General Lisa Monaco recently announced a DOJ National Cryptocurrency Enforcement Team.

The issues surrounding spoofing, whistleblowers, and cryptocurrency are ever-evolving, and we’ll be here to provide you the latest. For any questions, feel free to contact the author or your trusted Arnold & Porter advisor.

© Arnold & Porter Kaye Scholer LLP 2021 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.