U.S. derivatives regulators are seeking whistleblowers with evidence of fraud or market manipulation in the fledgling carbon markets.
The U.S. Commodity Futures Trading Commission’s (CFTC) whistleblower office issued an alert calling on potential whistleblowers to tip it off to misconduct in the trading of carbon credits or offsets.
The regulator said it will work with tipsters who report potential issues such as wash trading, market manipulation, the issuance of “ghost” credits, fraud in carbon credits themselves, and manipulation of tokenized carbon markets.
While the voluntary carbon market is valued at an estimated US$2 billion, that’s expected to grow to US$250 billion by 2050, as efforts to meet emission reduction targets ramp up, the regulator noted.
The CFTC stressed that it has oversight and enforcement authority over trading in carbon markets, spot markets for carbon credits, and derivatives linked to environmental commodities.
“Alongside the continued growth of CFTC regulated carbon offset derivatives contracts, the agency is building upon its expertise to ensure the utility and reliability of these markets, as well as its ability to identify and pursue any potential fraud or abusive practices,” said Rostin Behnam, chair of the CFTC, in a release.
Successful whistleblowers are eligible for monetary awards (between 10% and 30% of sanctions collected in an enforcement action), along with anti-retaliation protections and confidentiality provisions.
“As carbon credit markets continue to grow, we will act to foster the integrity of these markets by fighting fraud and manipulation,” said Ian McGinley, director of the CFTC enforcement division.
“Whistleblowers are invaluable allies in these efforts. We will diligently investigate all credible tips and complaints from whistleblowers relating to carbon credit markets.”