Court upholds CFTC denial of whistleblower payout in $1.475B currency case

On June 5, a federal appeals court told an early currency-market tipster he gets no share of a $1.475 billion bank settlement. 

The ruling is a clean lesson for anyone in compliance weighing whether to report what they see. Whistleblower awards are narrower than they look. Speaking up early does not earn one. Being generally right does not either. The tip has to drive the case the regulator actually brings. 

Trevor Kitchen traded foreign currencies for years. From 2008 to 2011 he used a platform run by Oanda Corporation, trading the dollar, the pound and the euro against the Swiss franc thousands of times. In August 2011 he watched those currencies drop sharply against the franc and decided it had to be collusion among market makers. He emailed regulators, including the CFTC, with a complaint centered on Oanda and what he described as market abuse and manipulation. His theory was that the platform and others were driving down the pound and the dollar using the Swiss franc. 

CFTC staff reviewed his Oanda account records, found nothing to back the claims, and closed that inquiry with no action. 

Almost two years later, in June 2013, Bloomberg reported that traders at several large banks were said to be rigging the WM/Reuters rates, the benchmark figures used to value currency trades. The CFTC says that report is what pushed it to open a benchmark manipulation investigation into five banks. Those cases settled, with penalties totaling $1.475 billion. Kitchen filed a formal tip in November 2013, but the benchmark team had not seen his earlier emails until then, and the court found his information was never used. 

Kitchen applied for an award under the Dodd-Frank rules, which tell the CFTC to pay tipsters whose original information leads to a successful action. The CFTC refused. He appealed. 

The D.C. Circuit backed the regulator. The judges separated two very different things. Kitchen's tips were about retail spot trading on Oanda. The bank cases were about benchmark rates, a different market and a different corner of the CFTC's authority. His emails never named a single bank. His focus was Oanda. 

He also claimed to be the hidden source behind the Bloomberg article that launched the bank probe. The court found nothing to support it. He had copied some Bloomberg addresses on old messages, but none matched the article's authors, and no one there ever reached out to him. 

The practical point for the industry is simple. A tip pays only when it is specific, credible, timely and tied to the conduct the regulator charges. The CFTC program tracks the SEC's, so the same reasoning carries over. Broad, early warnings fall short. 

The court affirmed all five of the CFTC's final orders.