The Commodity Futures Trading Commission has awarded almost $200m to a former Deutsche Bank employee who raised concerns about the manipulation of the Libor interest rate benchmark, marking the largest-ever payment under US whistleblower programmes.
The US derivatives regulator said the payment had been made for “timely original information” that significantly contributed to an already “open investigation”.
This led to a “successful enforcement action, as well as to the success of two related actions, by a US federal regulator and a foreign regulator”, the CFTC said in a statement. The agency did not identify the whistleblower, their employer or the associated regulatory action.
But people familiar with the matter said the award was related to a $2.5bn settlement paid by Deutsche Bank after a regulatory investigation into the manipulation of Libor, the disgraced interest rate benchmark underpinning global finance that was found to have been rigged by bankers a decade ago and that will begin to fade away next year.
Barclays, Deutsche Bank and Société Générale were among the banks that reached settlements with the CFTC and other agencies over the scandal.
The law firm Kirby McInerney in a statement identified the whistleblower as its client, who “provided extensive information, documents, and trading information in 2012” that triggered investigations by the CFTC as well as a US and foreign regulator on the “manipulation of crucial financial benchmarks used by global banks”.
“Manipulation of financial benchmarks enriches manipulators at the expense of market participants,” said David Kovel, managing partner at Kirby McInerney.
The $200m payout is the largest under the whistleblower programme established by the Dodd-Frank Act — which includes the CFTC and the Securities and Exchange Commission — as well as other schemes including the Internal Revenue Service, according to Kirby McInerney.
“It’s historic,” said Erika Kelton, a whistleblower lawyer at Phillips & Cohen. “I don’t know of any other award in any of the US whistleblower programmes that is as large as this.”
Since issuing its first award in 2014, the CFTC has awarded more than $300m to whistleblowers, who are eligible to receive between 10 per cent and 30 per cent of the monetary penalties collected.
But the latest award has already sparked controversy, with one CFTC commissioner, Dawn Stump, saying that she did not approve a portion of the payment that is “attributable to the collection of sanctions by the foreign regulator” — the first time for the CFTC.
Stump said the agency should be “particularly careful” of awards based on penalties collected by foreign authorities as they divert funds that would otherwise be available to American regulators or the US Treasury.
“It’s an eye-popping award,” said Paul Pantano, senior counsel at Willkie Farr & Gallagher, adding the resulting drop in funds available for whistleblowers who report activities in US markets was “concerning”.
A spokesperson for Deutsche Bank declined to comment.