CFTC Cracks Down Harder on Cryptocurrency Fraud Under Trump

The Commodity Futures Trading Commission (CFTC) has bolstered its police actions in the last fiscal year, driven largely by cryptocurrency cases, according to The Wall Street Journal. Under President Trump, the federal derivatives market regulator levied about $900 million in civil penalties in 2018 alone, exceeding the annual amount in five of the eight years of the Obama administration. The amount had declined in 2017, drawing criticism from consumer groups and some Democrats.

Gary DeWaaal, a former CFTC enforcement lawyer who is now special counsel at Katten Munchin Roseman LLP, told the WSJ that the agency knows cryptocurrency fraud is an issue, along with insider trading and manipulation, and has focused on spoofing.

CFTC More Vigorous Than Ever

J. Christopher Giancarlo, the CFTC chairman, extolled the agency’s enforcement activity numbers in a presentation in Minneapolis last week, calling it the most vigorous enforcement in its history.

The CFTC filed five times more spoofing related cases – practices that distort prices – in the past year than any prior year. The agency also won a court judgment that determined cryptocurrencies are commodities, which permits the regulator to police cryptocurrency markets.

Giancarlo said the agency in 2018 levied fines exceeding $10 million in 10 cases, as opposed to an average of three cases per year under the Obama administration.

The agency also reached settlements between $30 million and $90 million concerning interest rate benchmark manipulation with several banks. He compared the 2018 numbers to years 2009 and 2016, not 2017, which was a transition year between the administrations.

Also read: Cryptocurrency is ‘here to stay’: CFTC chairman Giancarlo

CFTC Outpaces SEC Actions

The CFTC actions are expected to contrast with those of the Securities and Exchange Commission (SEC), which has played down its numbers in advance of releasing them later in the year. The two agencies police different segments of the financial markets, with some overlap on derivatives and other areas.

SEC fines dropped by 7.2% in 2017 to around $3.8 billion, marking the lowest since 2013, according to the agency.

Stephanie Avakian, the SEC’s co-director of enforcement, indicated in a September speech the agency’s numbers could fall again in 2018 partly on account of Supreme Court decisions curbing the agency’s ability to reclaim funds for victimized investors. However, she has vowed that the agency will take a more active role in policing illegal initial coin offerings (ICOs), resulting in “more substantial” enforcement actions.