Securities, Commodities and Banking Fraud - TZ Legal - Fraud Fighters
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Securities, Commodities and Banking Fraud

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 nearly $8 billion in mortgage fraud alone. Often the government uncovers the fraud thanks to reports from whistleblowers. By the end of 2020, the United States Securities and Exchange Commission had awarded over $740 million to whistleblowers. By that same period, the Commodity Futures Trading Commission recovered nearly $1 billion for commodities-related fraud and paid whistleblowers more than $120 million.

There are many types of fraud that can occur in the Securities, Commodities, and Banking industries. The False Claims Act and other anti-fraud laws involving housing, mortgage, and other lending protect against wrongdoing and provide a path to seek justice. There are four main legal routes that whistleblowers can take to report fraud in these 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

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
  • Common Areas of Fraud in Government Lending Programs:
  • Single-family lending
  • Multifamily housing programs
  • Reverse (HECM) mortgage programs for seniors
  • Small Business Administration loan programs

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.

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 15-30% of the amount the government recovers from the financial institution, bank, or firm.

Under the law, an individual (or qui tam relator) needs an attorney to help them bring the action on behalf of the United States.

The SEC Whistleblower Program

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

Under the program, SEC Whistleblowers who provide information leading to a settlement are eligible to receive between 10 to 30% 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 money 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 that these institutions may have liability even if the economic harm is to the financial institution itself.

There is a ten-year statute of limitations under FIRREA, which means that the Department of Justice can pursue fraud that occurred ten 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 necessary 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 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 more than $120 million to individuals who have reported fraud that has resulted in sanctions orders totaling nearly $1 billion.

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 $20 million to individuals who voluntarily provided original information or analysis that led to successful enforcement actions in the fiscal year 2020.

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

Contact Us

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. Contact us for a free consultation.

Have more questions? See our frequently asked questions.

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