CFTC Ups Crypto Regulation In 2018

The Commodity Futures Trading Commission (CFTC) reported an increase in enforcement actions in the last fiscal year, partly due to a rise in cryptocurrency cases and spoofing schemes. According to The Wall Street Journal, the federal derivatives-market regulator also handed out around $900 million in penalties, higher than the amount in five of the eight years of the Obama administration.

“They’ve tried to clarify some of their emphases — we know that cryptocurrency fraud is an issue, manipulation, insider trading is an issue, and they’re very focused on spoofing,” said Gary DeWaal, special counsel at Katten Muchin Rosenman and a former CFTC enforcement lawyer.

CFTC Chairman J. Christopher Giancarlo boasted about the agency’s enforcement numbers in a recent speech in Minneapolis. While admitting that “you can’t get a complete picture of an enforcement program through quantitative metrics alone,” he added that “by any measure, enforcement during this last year has been among the most vigorous in the history of the CFTC.”

In the past fiscal year, the agency filed five times as many cases related to spoofing than any previous year. It also reached large settlements related to interest-rate benchmark manipulation with banks, including JPMorgan Chase, Deutsche Bank, Bank of America and others.

In addition, the agency won a court case establishing cryptocurrencies as commodities and giving it the ability to regulate those markets. In February, CFTC Commissioner Brian Quintenz said the crypto industry should think about adopting its own standards and best practices to make sure they follow regulations.

Giancarlo also revealed that the Commission had imposed fines of more than $10 million in 10 cases in 2018, compared with an average of three big-money cases a year during the Obama administration.

The other federal government’s other markets regulator, the Securities and Exchange Commission (SEC), will release its figures for the fiscal year later in 2018. Total fines ordered through SEC enforcement activity fell 7.2 percent in 2017 to about $3.8 billion, the lowest total since 2013, and SEC Enforcement Co-Director Stephanie Avakian recently said that number could fall again.