CFTC Continues Cracking Down Crypto Fraud under President Trump’s Directives

According to The Wall Street Journal, the CFTC has exercised its enforcement functions largely due to the cryptocurrency cases in the last fiscal year.

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Under President Trump’s directives, the federal market regulator has levied civil penalties totaling about $900 million this year alone. The amount exceeds the annual amount levied in five out of eight years of Obama’s tenure. This amount had decreased in 2017, getting criticism from some Democrats and consumer groups.

Following a statement from the former CFTC enforcement lawyer, Garry DeWaaal, the agency notes that crypto fraud is a big issue alongside manipulation and insider trading. That said, the authority is focusing on spoofing. DeWaaal is also on the special counsel of the Katten Munchin Roseman LLP.

CFTC Gets More Active Than Ever

Earlier last week in Minneapolis, the CFTC chairman J. Christopher Giancarlo talked about the authority’s enforcement activity numbers, calling it the most rigorous enforcement in history. The CFTC noted five times more spoofing cases – practices aimed at manipulating market prices – in the last year compared to other years. Moreover, the agency won a court ruling declaring cryptocurrencies as commodities, giving the authorities the right to monitor cryptocurrency markets.

Giancarlo also revealed that the agency levied fines ranging above $10 million in about 10 cases in 2018, from an average of 3 cases during Obama’s administration. The CFTC also recorded settlements between $30 – 90 million on interest rate benchmark distortion by several banks. The chairman compared the 2018 numbers with 2016 and 2009, leaving out 2017, as it was the transitioning year between both administrations.

CFTC Activity in Contrast with SEC

The actions of the CFTC are expected to overlap with those of the SEC (Securities & Exchange Commission), which has revealed its numbers earlier, before releasing them officially next year. Both agencies monitor different sections of the financial markets, overlapping in different derivatives and several other areas.

In 2017, the SEC fines dropped to about $3.8 billion, a 7.2% decrease. According to the agency, this marks the lowest point since 2013.

According to SEC’s enforcement co-director Stephanie Avakian, the agency numbers might fall again this year partly due to the Supreme Court ruling taking away the authority’s power to reclaim funds on behalf of victimized investors.

Despite the ruling, Stephanie vowed that the authority is taking an active role in monitoring illegal ICOs (initial Coin Offerings), leading to substantial enforcement actions.

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