Nestled in the exhibition room at this year’s Consensus conference, the U.S. Commodity Futures Trading Commission (CFTC) had a message for conference goers as they weaved in and out of booths representing various projects and startups in the space: “Be on the lookout for virtual currency fraud” and if you see it, let us know.
“The Whistleblower Office of the Commodity Futures Trading Commission (CFTC) is issuing this alert to inform members of the public about how they may make themselves eligible for both financial awards and certain protections while helping stop [sic] fraud and manipulation relating to virtual currencies,” a handout from the booth reads.
The CFTC has long classified bitcoin as a commodity, and the document states that the CFTC considers all “virtual currencies [as] commodities under the Commodity Exchange Act (CEA).”
This same act gives the agency regulatory power to prosecute virtual currency fraudsters. Since the 2017 price run-up, crypto scams have been on the agency’s radar and it’s been keen to keep investors privy to project warning signs. In cooperation with the U.S. Securities and Exchange Commission, the CFTC has cracked down on illegal bitcoin brokers and dealers, as well as fraudulent crypto consultants and token rackets like My Big Coin.
In the whistleblowing briefing document, the CFTC uses My Big Coin and CabbageTech as textbook examples of scammy behavior. Among red flags it encourages potential whistleblowers to look out for are pump-and-dump schemes, wash/insider trading, unregistered derivatives platforms and “supervision failures or fraudulent conduct (e.g., creating or reporting fictitious trading) by virtual currency exchanges.”
If you notice any of these behaviors in practice, “you don’t have to be an ‘insider’ … to be a whistleblower,” the document reads. It continues to tell readers that they can tip off bad actors through the agency’s website, asking that they provide as much information on the alleged scams and orchestrators as possible (this includes “identifying information” like social media profiles, screenshots, bitcoin addresses, email addresses, etc.).
Anyone whose whistleblow ends in more than $1 million in sanctions against such companies are entitled to 10 to 30 percent of the monetary penalty.
A CFTC represented declined an interview, telling Bitcoin Magazine that each employee must be cleared by the agency to go on record. Bitcoin Magazine did learn that this was the CFTC’s first year at Consensus and that the agency has been making its rounds through the crypto conference circuit over the past year.