In September 2021, the market capitalization for digital assets, such as cryptocurrencies and NFTs, was valued at $2.14 trillion. The cryptocurrency market has attracted a variety of fraudulent activities in which the perpetrators seek to capitalize on unsuspecting investors. Fortunately, the U.S. Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) have stepped in to penalize these newest forms of fraud. As with most enforcement agencies, information is key to enforcing compliance. Thus, these federal agencies will award whistleblowers who provide original information that meets specific criteria. Whistleblowers are offered the option for complete anonymity when providing such information.
The Dodd-Frank Act authorized the SEC and CFTC to provide monetary awards to eligible individuals who come forward with high-quality original information that leads to an enforcement action in which over $1,000,000 in sanctions is ordered. The range for awards is between 10% and 30% of the monies collected.
The Internal Revenue Service’s (IRS) definition of virtual currencies categorizes cryptocurrency as a commodity under the Commodity Exchange Act (CEA). When a virtual currency is used in a derivatives contract or fraud or manipulation involving a virtual currency traded in interstate commerce, CFTC enforcement of the CEA comes into play.
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