The payout by the Commodity Futures Trading Commission is the largest ever
According to people familiar with the matter, a whistleblower whose information helped US and UK regulators investigate manipulation of global interest rate benchmarks by Deutsche Bank AG was awarded nearly $200 million to aid in the investigation. .
The payment is the largest to date by the Commodity Futures Trading Commission, which settled enforcement actions against Deutsche Bank in 2015 with the Justice Department and the UK Financial Conduct Authority.
The CFTC’s announcement did not name the bank or the case, but the reward pertains to the bank’s manipulation of the London Interbank Offering Rate and similar widely used benchmarks, the people said.
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The whistleblower’s application for an award was initially denied by the CFTC, but the US derivatives regulator eventually decided the person’s information was helpful after the whistleblower submitted a request for reconsideration.
“We are very pleased that the CFTC was able to reverse an earlier decision and change their thinking,” said David Cowell, a managing partner at the law firm Kirby McInerney LLP, which represents the whistleblower. “It says a lot about the people out there that they don’t feel compelled to live with the wrong decision given the amount at stake.”
The Wall Street Journal previously reported that the former executive had provided information that helped with the CFTC and Justice Department investigations, which largely led to $2.5 billion in settlements With Deutsche Bank in 2015, including $800 million with the CFTC. He alleged that the bank manipulated LIBOR, the benchmark interest rate used to determine short-term loans to global banks, which could be manipulated by merchants and other bank employees because it was based on oral presentations and not on actual transactions. .
“The kind of information they provided was the kind of information that was very hard to get if you didn’t know where to look in a large financial organization,” Mr. Cowell said.
Rigging LIBOR was profitable for banks and other market participants because billions of dollars worth of derivatives known as swaps had price movements in the benchmark.
A Deutsche Bank spokesman declined to comment.
The prospect of such a large payment drove the CFTC whistleblower program in turmoil this year, as agency leaders argued, there was no mechanism in place to pay the former bank executive and other applicants and fund the program. The agency averted the crisis after President Biden signed a bill in July to fund the program.
By the time the whistleblower contacted a different agency, the CFTC investigation had already begun, officials wrote in an order awarding the award. But this information turned out to be valuable in interviews that officials conducted while expanding their investigations as ordered.
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Don Stump, the Republican commissioner on the CFTC, said in a statement that he disagrees with basing the award partly on a fine imposed by a foreign regulator. Like the CFTC’s announcement, Ms. Stump did not name the bank or the underlying matter in her statement.
Ms. Stump wrote that the CFTC has never before awarded a tipster based on enforcement action by a foreign regulator.
“I believe we need to take a particular look at cases where a whistleblower may submit a commission to his limited client for an award related to an action by a foreign futures authority to address a loss outside the United States. Calls to tap the Conservation Fund,” Ms Stump wrote.
Thursday’s award is the largest award issued to a single individual since the Dodd-Frank financial overhaul law of 2010 created programs to help avoid another large-scale fraud. Bernie Madoff’s Ponzi Scheme.
The Securities and Exchange Commission issued its biggest ever whistleblower payment last year About $114 million to a tipster.
“This is showing that the CFTC program, like the SEC program, has indeed reached its maturity, over the past 10 years,” said Mary Inman, an attorney representing whistleblowers at the law firm Constantine Cannon LLP.