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Financial Services Law Insights and Observations


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  • CFTC establishes the Office of Technology Innovation


    On July 26, the CFTC announced the reorganization of their fintech and consumer protection efforts by establishing the Office of Technology Innovation (OTI), formerly LabCFTC. As previously covered by InfoBtytes, in 2019 the CFTC announced that LabCFTC operates as an independent operating office of the agency, reporting directly to the chair of the CFTC. LabCFTC was established in 2017 as an initiative to engage innovators in the financial technology industry and promote responsible fintech innovation (covered by InfoBytes here.) The CFTC noted that OTI will “continue the CFTC’s efforts in incorporating innovation and technology into the agency’s regulatory oversight and mission critical functions by supporting the operating divisions and the Commission’s participation in domestic and international coordination.” The CFTC also noted that OTI’s new structure will provide more flexibility to ensure that it serves “internal and external stakeholders by, among other things, continuing to support outreach and providing rotational opportunities for CFTC employees to gain exposure and expertise.”

    Fintech CFTC Digital Assets

  • CFTC charges South African fund with CEA violations


    On June 30, the CFTC filed charges against a South African investment fund and its CEO for an allegedly fraudulent scheme that raised over $1.7 billion worth of Bitcoin from the public in violation of the Commodity Exchange Act (CEA) and CFTC Regulations. The complaint alleged that the CEO used various websites and social media to fraudulently solicit bitcoin from public participants to participate in a commodity pool controlled by the company, and “purportedly traded off-exchange, retail foreign currency (‘forex’) on a leveraged, margined and/or financed basis with participants who were not eligible contract participants (‘ECPs’) through a proprietary ‘bot’ or software program.” The CFTC is seeking: (i) full restitution for defrauded investors; (ii) disgorgement; (iii) civil monetary penalties; (iv) permanent registration and trading bans; and (v) a permanent injunction from future violations.

    Securities CFTC Enforcement Commodity Exchange Act

  • CFTC Commissioner Romero discusses crypto regulation


    On June 14, CFTC Commissioner Christy Goldsmith Romero discussed cryptocurrency regulation in an interview. According to sources, Romero rejected suggestions that the agency would be laissez-faire on cryptocurrency regulation, saying that the CFTC is positioned to protect consumers if provided with more authority. Throughout the interview, Romero noted some similarities between the present market and the 2008 market, stating that there is a “pretty sizeable market that’s largely unregulated.” Noting that a “regulatory gap” exists because the CFTC does not have any regulatory authority over the cash spot market, Romero said that Congress should close that gap. She mentioned her support for a bill similar to the Responsible Financial Innovation Act that she expects will give the CFTC more authority and will be introduced by Senators Stabenow and Bozeman. When asked about the possibility of regulation slowing the crypto market, Romero responded that “companies can’t scale up the way they need to without a lot of the financial institutions investments,” and that “regulation is needed.” She further noted that “bringing credibility [and] bring[ing] customer protections [] are going to be really important for scaling up.” She also referred to the case-by-case philosophy of CFTC enforcement actions, explaining that the agency looks at “where the evidence lies" and that part of this approach is "send[ing] a message to deter future violations of the law.” She further expanded on that point by saying that “since the CFTC doesn’t have regulatory authority, it has to rely on victims and whistleblowers," among other things.

    Romero also mentioned that a difference between now and 2008 is that there are not a lot of financial institutions invested in cryptocurrency, as many are “waiting for a regulatory framework" and more regulation. As more financial institutions become invested in cryptocurrency, she said that she expects there to be “more interconnections” and more customer protections. She also noted that her biggest concern is that “if regulation fails to keep pace with technology, the most vulnerable people are going to be hurt.” In terms of areas needing more customer protections, Romero identified the need for segregation of accounts, settlement, custody, and reducing cybersecurity risk. She also expressed her support for customer education, calling it “very important.”

    Fintech Federal Issues Digital Assets CFTC Cryptocurrency

  • CFTC requests feedback on climate-related financial risk

    Agency Rule-Making & Guidance

    On June 8, the CFTC published a request for information (RFI) in the Federal Register seeking public responses on climate-related financial risks related to the derivatives markets and underlying commodities markets. Among other things, the Commission is seeking input on the types of data that could help the CFTC evaluate climate-related financial risk exposures, scenario analysis and stress testing, risk management, disclosures, product innovation, digital assets, financially vulnerable communities, mechanisms for public-private partnerships/engagement, and coordination with other regulatory bodies. The CFTC emphasized that the responses “will help to inform the Commission’s next steps in furtherance of its purpose to, among other things, promote responsible innovation, ensure the financial integrity of all transactions subject to the Commodity Exchange Act, and avoid systemic risk.” Additionally, the Commission noted that it “may use this information to inform potential future actions including, but not limited to, issuing new or amended guidance, interpretations, policy statements, regulations or other potential commission action within its authority under the Commodity Exchange Act, as well as its participation in any domestic or international fora.”

    Comments on the RFI are due August 8.

    Agency Rule-Making & Guidance CFTC Climate-Related Financial Risks Federal Register Fintech Digital Assets

  • CFTC awards $625,000 to whistleblowers


    On March 28, the CFTC announced approximately $625,000 in awards to four whistleblowers whose information led the agency to a successful Commodity Exchange Act enforcement action. The associated order noted that the claimants “provided the Commission with original information,” and “each provided ongoing cooperation and assistance to Division staff, which significantly contributed to the success of the Covered Action.” One claimant received a higher award percentage to recognize that he or she provided the highest level of ongoing assistance and cooperation.

    The CFTC has awarded approximately $330 million to whistleblowers since the enactment of its Whistleblower Program under Dodd-Frank, with whistleblower information helping prosecute enforcement actions leading to more than $3 billion in monetary sanctions.

    Securities CFTC Whistleblower Enforcement Commodity Exchange Act

  • CFTC awards $10 million to whistleblower


    On March 18, the CFTC announced an approximately $10 million award to a whistleblower whose information led the agency to a successful Commodity Exchange Act enforcement action. According to the CFTC, the claimant voluntarily provided original, “useful information at the earliest stages of the investigation and later provided supplemental information.” The associated order also noted that because of the claimant’s allegations, CFTC staff were able to draft the earliest round of subpoenas.

    The CFTC has awarded approximately $330 million to whistleblowers since the enactment of its Whistleblower Program under Dodd-Frank, with whistleblower information helping the CFTC prosecute enforcement actions leading to more than $3 billion in monetary sanctions. 

    Securities CFTC Enforcement Commodity Exchange Act Whistleblower

  • CFTC awards $500,000 to whistleblowers


    On March 10, the CFTC announced awards totaling approximately $500,000 to two whistleblowers who “separately provided significant information and substantial assistance” that led to a successful Commodity Exchange Act enforcement action. The associated order noted that the claimants voluntarily provided original information, which began an underlying investigation and “significantly contributed to the success” of the enforcement action.

    The CFTC has awarded approximately $300 million to whistleblowers since the enactment of its Whistleblower Program under Dodd-Frank, and whistleblower information has led to nearly $3 billion in monetary relief.

    Securities Enforcement CFTC Commodity Exchange Act Whistleblower

  • CFTC orders unregistered respondents to pay $2.6 million for fraudulent solicitations


    On February 23, the CFTC announced a $2.6 million settlement with a North Carolina-based company and its president for allegedly acting as unregistered commodity trading advisors and commodity pool operators, and for advertising without making required disclosures. Among other things, the respondents allegedly engaged in binary options solicitation and trading fraud through the operation of two webpages and related social media channels. According to the CFTC, the respondents made numerous false statements to solicit business, which claimed that traders could choose from the company owner’s winning strategies to earn significant profits. However, the CFTC stated that the owner was not actually a successful trader and had an overall losing trading record. Additionally, the respondents distributed client testimonials and training videos without providing disclosures required under CFTC regulations. As a result, ten participants lost roughly $410,000 in a managed account trading pool, while approximately 1,600 customers lost at least $945,000 through fraudulent solicitations for binary options signals, trainings, and strategy course offerings. While the respondents did not admit or deny any of the allegations, they agreed to pay $409,965 in restitution, $896,673 in disgorgement, and a $1,306,638 civil monetary penalty. Additionally, the respondents must cease and desist from any further violations of the Commodity Exchange Act or CFTC regulations. The order also permanently bans the respondents from trading on, or trading subject to, the rules of any CFTC-registered entity, and from engaging in any activities requiring CFTC registration. Respondents are also prohibited from, directly or indirectly, entering into any transactions involving commodity interests.

    Securities CFTC Enforcement Commodity Exchange Act Settlement

  • Five agencies launch effort to address romance scams

    Federal Issues

    On February 7, the CFTC, FinCEN, CFPB, ICE, and U.S. Postal Inspection Service launched the nationwide awareness effort “Dating or Defrauding?” to remind the public about the ongoing dangers of romance scams that target individuals through dating apps or social media. The agencies draw attention to new types of scams that have costs victims millions of dollars, and highlight recent FTC studies showing that 2020 was a record year for romance scams with the number of these types of complaints continuing to increase in 2021. According to a January FTC blog post (covered by InfoBytes here), more than 95,000 people reported about $770 million in losses to fraud initiated on social media platforms in 2021, with investment scams and romance scams having the most reported dollars lost. A recent FTC data spotlight showed that consumers reported losing $547 million to romance scams in 2021 alone. The agencies’ initiative provides guidance on how to recognize scams before individuals give away any money or assets, as well as measures to take if they have been victimized.

    Federal Issues FinCEN CFTC CFPB ICE U.S. Postal Inspection Service FTC Consumer Finance Consumer Protection

  • Agencies file lawsuit in scheme targeting the elderly

    Federal Issues

    On February 1, the California Department of Financial Protection and Innovation (DFPI), along with the CFTC and 26 other state regulators, announced a complaint against a precious metals dealer and its owner (collectively, “defendants”) for allegedly perpetrating a $68 million fraudulent scheme against more than 450 individuals nationwide, specifically against the elderly. According to the complaint, the defendants allegedly utilized false statements on its website regarding the risk and safety of their traditional retirement accounts and used fear tactics to convince senior citizens to purchase the precious metals. The complaint alleged that the company violated the federal Commodity Exchange Act by targeting the elderly and advising them to dissolve their savings and traditional retirement accounts in order to purchase their highly inflated and overpriced products, and that defendants had misrepresented their credentials and advised customers that the products were “a safe and conservative investment.” The complaint seeks disgorgement, civil monetary penalties, restitution, permanent registration and trading bans, and a permanent injunction against further violations of the Commodity Exchange Act, state regulatory laws, and CFTC regulations.

    The same day, the SEC filed a complaint against the defendants in the U.S. District Court for the Central District of California for allegedly violating the antifraud provisions of the federal securities laws. The complaint seeks permanent injunctions, disgorgement, plus interest, and civil penalties.

    Federal Issues DFPI CFTC SEC Elder Financial Exploitation State Regulators Enforcement State Issues Courts Commodity Exchange Act


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