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Securities, Commodities, and Banking Fraud

By the end of FY 2020, the United States Securities and Exchange Commission (SEC) had awarded over $740 million to whistleblowers. By that same period, the Commodity Futures Trading Commission (CFTC) recovered nearly $1 billion for commodities-related fraud and paid whistleblowers more than $120 million. In FY 2022, the SEC awarded $229 million to whistleblowers in 103 awards, which was the second-highest amount the Commission has ever awarded to whistleblowers. For FY 2022 as well, the CFTC awarded approximately $200 million to a single whistleblower and about $11.5 million to 7 other whistleblowers.

The United States Department of Justice and other federal agencies have been aggressively investigating fraud related to securities, commodities, banking, and lending practices. The Department of Justice has recovered billions in mortgage fraud alone. Often the government uncovers fraud thanks to reports from whistleblowers.

Securities, Commodities, and Banking Fraud Whistleblower Lawyers

Our attorneys are well-versed in fraud in the securities, commodities, and banking sectors and can help you blow the whistle on fraudulent activity taking place in any of these industries. Let our securities, commodities, and banking fraud whistleblower lawyers help in your case.

What are Securities Fraud and Commodities Fraud?

Securities fraud, or stock or investment fraud, is a type of white-collar crime that primarily involves misrepresenting or falsifying information to influence investors’ trading decisions. For example, misrepresenting a company’s stock or value would constitute securities fraud.

Commodities fraud, on the other hand, deals with the delivery of assets. If a contract specifies a monetary payment in exchange for assets of a certain quantity delivered on a certain date, and they are never delivered or are delivered in an incorrect amount, the party who accepted the payment may be on the hook for commodities fraud.

Common Types of Securities and Commodities Fraud

There are many types of fraud that can occur in the Securities and Commodities industries, including:

  • Pump and dump schemes – Promoting a stock under false or misleading pretenses to create a buying frenzy in order to “pump” up the price, and then “dumping” shares of the stock by selling at the inflated price.
  • High yield investment fraud – Advertising yields in excess of 100% per year to lure in new investors and using their money to pay off older investors.
  • Advance fee schemes – Occurs when someone is lured into paying someone for something of greater value without ever receiving what is promised.
  • Foreign currency fraud – Convincing traders to trade in the foreign exchange market, which is inherently volatile and risky, with the fraudulent promise of high profit margins.
  • Broker embezzlement – Brokers using unauthorized actions to steal from their clients.
  • Insider trading – Another form of securities fraud that involves the misuse of accurate information. Specifically, it is illegal to use a company’s confidential financial and trading information to make stock and investment decisions.

Anyone looking to file securities fraud cases must enlist the help of a lawyer to blow the whistle on investment fraud. Fortunately, the attorneys on our team are experienced in helping whistleblowers expose fraud investment schemes and commodities fraud.

What is Bank Fraud?

Bank fraud covers a wide array of financial fraud crimes and includes any attempt to illegally obtain funds or assets from a financial institution. Bank fraud commonly involves the fraudulent use of checks, debit and credit cards, and safety deposit boxes but can include other types of financial fraud.

Common Types of Bank Fraud

Other examples of bank fraud include:

  • Money laundering – Misrepresenting the origins of fraudulently obtained funds by transferring money through a business or foreign bank.
  • Accounting fraud – Misrepresenting a company’s financial health to make it appear better than it really is in order to lure investors and shareholders.
  • Wire transfer fraud – Posing as a trusted source, such as a company or family member, to gain immediate funds through wire transfer.
  • Loan fraud – Falsifying an application for a loan.

Legal Reporting Options for Financial Fraud Whistleblowers

There are at least five legal routes that whistleblowers can take to report fraud in the securities, commodities, and banking industries:

  • The False Claims Act
  • The Securities and Exchange Commission (SEC) Whistleblower Program
  • The Bank Fraud Whistleblower Program
  • Commodities Futures Trading Commission (CFTC) Whistleblower Reward Program
  • Anti-Money Laundering Act Whistleblower Program

The False Claims Act

The False Claims Act (FCA) protects against any false or fraudulent claims submitted to a program funded or insured by the government. FCA related to securities, commodities, or banking fraud applies to any fraud scheme involving Government-insured or Government-funded housing, mortgage, or lending programs. Violations include false claims or fraud committed by Government contractors, subcontractors, grantees, mortgage or other lending underwriters, and loan servicers.

There are several goals of the False Claims Act:

  • Recover misspent money under Government housing, mortgage, and lending programs
  • Deter future misconduct by would-be wrongdoers
  • Provide disincentives (penalties) to financial institutions, lenders, servicers, and other participants in housing-related programs to stop fraud before it happens
  • Provide financial incentives to individuals like you to report companies that cheat taxpayers
  • Protect whistleblowers from retaliation by employers

Under the False Claims Act, an individual who reports financial fraud to the government is called a “qui tam relator.” The False Claims Act is the Department of Justice’s primary tool for remedying the knowing misuse of taxpayer money, including funds under Government-insured or funded housing, mortgage, or other lending programs, such as:

  • Single-family lending under the FHA and VA mortgage insurance programs
  • HUD Multifamily housing programs
  • Reverse (HECM) mortgage programs for seniors
  • Small Business Administration (SBA) loan programs

The SEC Whistleblower Program

The U.S. Securities and Exchange Commission (SEC) Whistleblower Program provides financial rewards to individuals who:

  • report violations of securities laws
  • report violations of the Foreign Corrupt Practices Act (FCPA)
  • report bribery of foreign government officials

Under the program, SEC Whistleblowers who provide information leading to a settlement are eligible to receive between 10 to 30 percent of the money recovered by the government. The SEC Whistleblower Reward Program also has protections against retaliation for whistleblowers.

Bank Fraud Whistleblower Reward Program

Under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), 12 USC §1833a, the Department of Justice can seek civil monetary penalties against individuals and financial institutions that violate criminal laws such as mail and wire fraud and bank fraud. Here is an example of where an individual received a $1.6 million dollar reward for reporting FIRREA fraud of a mortgage company.

Under FIRREA, the Department of Justice can impose penalties for fraud against financial institutions and fraud committed by financial institutions, which means these institutions may have liability even if the economic harm is to the financial institution itself. There is a 10-year statute of limitations under FIRREA, which means the Department of Justice can pursue fraud that occurred 10 years prior.

Whistleblowers who report false or fraudulent claims involving financial institutions, banks, mortgage companies, or services may be eligible for a reward under the Financial Institutions Anti-Fraud Enforcement Act (FIAFEA), 12 USC §4204.

There are unique procedures for disclosing financial fraud to the Justice Department. An individual needs an attorney to help them prepare the papers needed to make a disclosure under FIAFEA. The Department of Justice has obtained sizeable recoveries under FIRREA, and it has been a successful enforcement tool.

The CFTC Whistleblower Reward Program

The 2007-2008 financial crisis and a world-famous Ponzi scheme led to the creation of the Commodity Futures Trading Commission’s (CFTC) Whistleblower Reward Program. The program is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act adopted in 2010 (Dodd-Frank). As one example, the CFTC paid its largest award ever in 2022 to $200 million to an individual who voluntarily provided original information or analysis that led to successful enforcement actions in the fiscal year 2022.

The CFTC Whistleblower Reward Program rewards individuals for reporting wrongdoing or fraud in commodity futures, options, over-the-counter (OTC) derivatives, swaps, and other violations of the Commodity Exchange Act. Per the Commodity Futures Trading Commission Whistleblower Program, the CFTC has awarded around $365 million to individuals who have reported fraud that has resulted in sanctions orders totaling more than $3 billion by the end of 2023.

Under the whistleblower award program, an individual who provides information that directly leads to sanctions and monetary recovery for CFTC may receive 10 to 30 percent of the recovery. The CFTC Whistleblower Reward Program also provides protections against retaliation for whistleblowers.

If you are aware of old, new, or evolving fraud schemes involving commodity futures, options, over-the-counter (OTC) derivatives, swaps, and other violations of the Commodity Exchange Act, the CFTC may be very interested in learning more about the information you have. You may also be entitled to a financial reward.

The Anti-Money Laundering Act Whistleblower Program

The Anti-Money Laundering Act of 2020, enacted on January 1, 2021, directed the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) to develop a whistleblower program to encourage reporting of Bank Secrecy Act (BSA) violations, which include criminal financial schemes like tax evasion, money laundering, and terrorist financing. However, it was criticized for lacking funds to pay whistleblowers. The 2022 AML Whistleblower Improvement Act, modeled on the Dodd-Frank Act and the SEC whistleblower program, addresses this by providing funding for whistleblower rewards from the Financial Integrity Fund without requiring legislative appropriation. It guarantees a minimum award of 10% of penalties collected for violations exceeding $1,000,000. Whistleblowers, who can be any individuals with original knowledge of violations, are protected against retaliation, including employment-related discrimination and harassment.

Talk to a Qui Tam Attorney

A qui tam relator is an individual who brings an action on behalf of the United States to help the government recover money on behalf of the taxpayer. If the government recovers the misspent money, the individual (or qui tam relator) is entitled to receive 10 to 30 percent of the amount the government recovers from the financial institution, bank, or firm. Under the law, a whistleblower needs an attorney to help them bring the action on behalf of the United States.

Contact Our Securities, Commodities, and Banking Fraud Whistleblower Attorneys

Our securities, commodities, and banking fraud whistleblower lawyers have a tremendous track record of successfully representing whistleblowers in all industries and can help you too. Contact us for a free consultation.

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