CFTC Publicizes 2024 Enforcement Results
Commentary by Steven Lofchie
The CFTC summarized its enforcement efforts for Fiscal Year 2024, touting a "record-setting $17.1 billion in monetary relief [and] sanctions" driven by digital assets actions. (See also, links to cases in Report Addendum.)
The CFTC reported that it initiated 37 administrative cases, 4 statutory disqualification actions and 17 civil injunctive cases. The actions spanned a variety of misconduct, including fraud (11), reporting and recordkeeping (11), illegal off-exchange contracts and failure to register (9), manipulative conduct (5) and supervision failures (5).
The CFTC highlighted key settlements related to:
- Digital Assets, including settlements with FTX and Binance, along with charges against Voyager's CEO and several decentralized finance participants. The CFTC said that "the resolution of digital asset cases that resulted in the agency's largest recovery ever," including "$2.6 billion in civil monetary penalties and $14.5 billion in disgorgement and restitution."
- Carbon Credit Fraud, including "first-ever" actions in voluntary carbon credit markets cases involving false reporting and manipulation.
- Market Integrity, including cases involving false reporting, disruptive trading and compliance violations across commodities and derivatives.
The CFTC also underscored the success of its whistleblower program. The agency said it awarded over $42 million to whistleblowers in cases generating $162 million in recoveries.
Commentary
Like the SEC, the CFTC over-emphasizes its role as an enforcement regulator and as a collector of fines. Generally, the economy would be better served if the financial regulators focused more on rules (or the elimination of rules) that improve the markets.
As for the CFTC's record $17.1 billion in monetary relief, over two-thirds relates to FTX, so the amount will not be collected in light of the FTX bankruptcy. The CFTC is not the only agency boasting of record, but meaningless, fine amounts. The SEC bragged that it had obtained a record $8.2 billion (chump change compared to the CFTC's number), more than half of which was from a bankrupt cryptocurrency entity that has no ability to pay.
The purpose of imposing regulatory penalties should not be to set or tout new annual records. It is to catch violations and issue penalties that are appropriate to those violations.
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The SEC reported enforcement results for Fiscal Year 2024, highlighting a decline in the total number of enforcement actions year over year, but a record amount in financial remedies.