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Apr 28, 2021 by |

Orange County and Los Angeles CFTC Whistleblower Attorney: Allegations of False, Misleading or Inaccurate Reporting and Wash Trading in Digital Assets

ATTORNEY NEWSLETTER

CFTC Fines Digital Asset Exchange Operator

$6.5 Million Civil Penalty

CFTC Alleges Fraud In Operations of Trading Platform

The U.S. Commodities Futures Trading Commission (CFTC) polices the options and commodities markets in the U.S and the digital asset/cryptocurrency market. As part of the CFTC’s enforcement tools, the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), Pub. L. 111-203, established a CFTC whistleblower program that rewards whistleblowers for original information of fraud or other illegal activities that may lead to a successful enforcement action by the agency. See 7 U.S.C. § 26 et seq.  Various kinds of trading frauds are considered as illegal by the CFTC including so-called wash trading where, in order to artificially move prices up or down, a trader gives the appearance that purchases and sales have been made, without actually incurring market risk or changing the trader’s true market position.   If you have information of any form of commodities or options trading fraud the Orange County and Los Angeles CFTC whistleblower attorneys at Evans Law Firm, Inc. can assemble your information in the form required by the CFTC for investigation and possibly a reward if the agency completes a successful enforcement action including recovery of civil penalties or disgorgement of illegal gains.  If you have information of options trading fraud, call us today at (415)441-8669 or toll free at (888)503-8267.

Allegations of Fraud in Digital Asset Reports and Trading

According to a recent announcement, [1] the CFTC has issued an order filing and settling charges against a digital asset exchange for reckless false, misleading, or inaccurate reporting as well as wash trading by a former employee on one of the operator’s trading platforms.  The order requires the firm to pay a civil monetary penalty of $6.5 million and to cease and desist from any further violations of the Commodity Exchange Act or CFTC regulations, as charged.  According to the order, between January 2015 and September 2018, the digital asset trading operator recklessly delivered false, misleading, or inaccurate reports concerning transactions in digital assets, including Bitcoin, on the electronic trading platform it operated. During this period, the firm allegedly operated two automated trading programs, which generated orders that at times matched with one another. The company failed to disclose that it was operating more than one trading program and trading through multiple accounts.  In addition, the order finds that while the two trading platforms had independent purposes, in practice the programs matched orders with one another in certain trading pairs, resulting in trades between accounts owned by the firm.  The firm included the information for these transactions on its website and provided that information to reporting services, either directly or through access to its website. According to the order, transactional information of this type is used by market participants for price discovery related to trading or owning digital assets, and potentially resulted in a perceived volume and level of liquidity of digital assets, including Bitcoin, that was false, misleading, or inaccurate. The order also finds that over a six-week period—August through September 2016—a former employee of the firm used a manipulative or deceptive device by intentionally placing buy and sell orders in pairs of certain digital assets that matched each other as wash trades. This created the misleading appearance of liquidity and trading interest in the assets traded.

Covered Action Rewards

A CFTC case begins with a TCR (“Tip, Complaint, or Referral”) Form filed with the Commission. The Commission recommends that whistleblowers seek the counsel of experienced CFTC/SEC whistleblower attorneys to assist them in the process of submitting a TCR form. This will ensure they take the proper steps to remain anonymous and qualify for a whistleblower award.  Once the CFTC determines a fine or obtains any recovery based on the information contained in the TCR then submit a Form WB-APP with the CFTC to claim a reward for the information they provided that led to the successful enforcement action.

Contact Us

Ingrid M. Evans and the other CFTC whistleblower attorneys at the Evans Law Firm, Inc. can assist you in preparing and submitting your TCR with the best chance for an ultimate reward if the CFTC elects to take action and the enforcement action is successful.  Call Ingrid and the firm’s other Orange County/Los Angeles CFTC whistleblower attorneys today at (415) 441-8669, or toll free at (888)503-8267 or by email at <a href=”mailto:info@evanslaw.com”>info@evanslaw.com</a>.  Evans Law Firm, Inc. also represents whistleblowers in False Claims Act cases, offshore tax avoidance schemes or other tax fraud before the Internal Revenue Service, and bank fraud under the Financial Reform, Recovery, and Enforcement Act (FIRREA/FIAFEA),

[1] Evans Law Firm, Inc. was not involved in this case in any way.

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