Photo of Nowell D. Bamberger

Nowell D. Bamberger’s practice focuses on cross-border contentious disputes matters, including litigation and criminal and regulatory investigations.

On March 6, 2019, the U.S. Commodity Futures Trading Commission (“CFTC”) Enforcement Division released an advisory (the “Advisory”) on self-reporting and cooperation for violations of the Commodity Exchange Act (“CEA”) that involve foreign corrupt practices.[1]  The Advisory lays out guidelines for companies or individuals “not registered (or required to be registered) with the CFTC” to receive significant cooperation credit for voluntarily and timely disclosing CEA violations involving foreign corrupt practices.[2]  Indeed, where such disclosure is followed by “full cooperation and appropriate remediation” and other measures, the Division of Enforcement will extend a presumption that no civil monetary penalties be imposed.[3]  Moreover, while registrants—which are subject to “independent reporting obligations”—will not benefit from such a presumption, cooperation may still garner “substantial reduction in the civil monetary penalty.”[4]

The Advisory is the latest signal of the CFTC’s efforts over the last two years to more clearly define the benefits of voluntary cooperation with the Agency.[5]  This may indicate that the CFTC is taking an increased interest in corruption cases related to the commodities or swaps markets. Continue Reading CFTC Enforcement Division Issues New Advisory on Self-Reporting and Cooperation

On March 4, 2019, the Commodity Futures Trading Commission (“CFTC”) announced a whistleblower award of over $2 million to an individual—unaffiliated with the company the CFTC charged—for providing expert analysis in conjunction with a related action instituted by another federal regulator.  While the Securities and Exchange Commission, which possesses a similar whistleblower award regime,[1] has previously issued awards to multiple claimants for both related actions[2] and to company outsiders,[3] this is the first such award to be granted by the CFTC in either respect.

The award demonstrates the CFTC’s continued commitment to the Whistleblower Program, and to using all available means in conducting enforcement actions.  This award also reflects both the CFTC’s willingness to collaborate with other federal regulators and to rely on external sources of expert data analysis and likely reflects the CFTC’s continued expansion of its Whistleblower Program, both in terms of sources of information and awards granted.  Continue Reading CFTC Issues First Whistleblower Award Originating From Both a Related Action and a Company Outsider

On 12 February 2019, the English High Court issued a judgment in proceedings related to the takeover of Autonomy Corporation Limited (now ACL Netherlands BV) by the Hewlett-Packard group in 2011. The question before the Court was whether a U.S. grand jury subpoena served on Hewlett Packard Enterprise (the U.S. parent company of the claimants) required certain documents received by the claimants solely through disclosure in English High Court litigation, as well as witness statements exchanged between the parties to that litigation, to be produced to the U.S. Federal Bureau of Investigation.

In summary:

  • The Court refused to allow disclosure of the documents in response to the grand jury subpoena on the basis that the subpoena did not override English public policy considerations which seek to preserve a litigant’s right to privacy and confidentiality, nor were the parties to the English proceedings compelled to comply with terms of the subpoena.
  • The decision illustrates the high threshold which needs to be met to obtain the court’s permission to make collateral use of documents disclosed in English proceedings, and demonstrates the level of scrutiny which subpoenas from U.S. authorities will be subjected to by the English courts where they relate to documents disclosed in English proceedings and protected by the English courts’ confidentiality rules.

Please click here to read the full alert memorandum.

On January 10, 2019, a Magistrate Judge in the Northern District of California issued an order denying an application for a search warrant that would have compelled any individual present at the premises to be searched to unlock their digital devices using biometric features, such as thumb prints and facial scans.  The order is notable in that the search warrant was not rejected on Fourth Amendment grounds, but rather on the grounds that requiring a person to unlock his or her digital device ran afoul of the Fifth Amendment’s privilege against self-incrimination.[1]  Providing a thumb or facial scan, the court reasoned, constituted testimony protected by the Fifth Amendment, analogizing biometrics to passwords that similarly protect information stored on devices.  This decision highlights the current tension in the courts on the accessibility of information stored on digital devices, and the courts’ continuing efforts to develop rules governing this rapidly-evolving area of law. Continue Reading Court Holds That 5th Amendment Self-Incrimination Privilege Precludes Compelling Fingerprint or Facial Recognition Access to Digital Devices

On December 19, 2018, the United States Attorney’s Office for the Southern District of New York (the “USAO”) announced criminal charges against and entered into a deferred prosecution agreement (the “DPA”) with Central States Capital Markets, LLC (“CSCM”), a Kansas-based broker-dealer, under the Bank Secrecy Act (the “BSA”).[1]  The charge was for a felony violation of the BSA, which consisted of CSCM’s willful failure to file a suspicious activity report (“SAR”) regarding the illegal activities of one of its customers.  According to the USAO, this represents the first ever criminal BSA charge brought against a United States broker-dealer.  This case is another milestone in the recent trend towards stricter enforcement of the anti-money laundering (“AML”) regulatory requirements applicable to broker-dealers. Continue Reading First Ever Criminal Bank Secrecy Act Charge Brought Against U.S. Broker-Dealer

On November 15, 2018, the Division of Enforcement (the “Division”) of the U.S. Commodity Futures Trading Commission (“CFTC”) released its Annual Report on the Division of Enforcement (the “Report”), highlighting the enforcement division’s recent initiatives and reinforcing its focus on cooperation and self-reporting.  The Report provides a succinct overview of the Division’s enforcement priorities over the last year, discusses its overall enforcement philosophy, sets out key metrics about the cases brought in the last year, and highlights its key initiatives for the coming year.  While the Division’s priorities—preserving market integrity, protecting customers, promoting individual accountability, and increasing coordination with other regulators and criminal authorities—do not mark a departure from prior guidance, the Report does highlight the Division’s particular focus on individual accountability and a few target areas of enforcement.  Continue Reading Virtual Currencies, Manipulation, Cooperation, and More: CFTC Enforcement Division’s 2018 Annual Report

On Monday, following two reversals of convictions, the U.S. Attorney’s Office for the District of Connecticut moved to dismiss the sole securities fraud claim remaining against former Jefferies bond trader, Jesse Litvak, bringing an end to the 5 1/2-year long case against him.[1]  During the case’s winding procedural path, the Government twice secured convictions against Litvak by jury trial—on the theory that Litvak’s alleged misstatements about his own costs and profit margins for residential mortgage-backed securities (“RMBS”) trades would have been material to the decision-making of a reasonable (and often sophisticated) investor-buyer.  And twice the Second Circuit overturned the convictions on narrow and technical grounds.  Notably, even while seeking to dismiss the remaining charge, the Government maintains in its filing that the Second Circuit’s decisions left undisturbed the soundness of its legal theories—namely that a broker-dealer’s misstatements relating to his own profits to sophisticated counterparties could satisfy the materiality requirement for securities fraud as a matter of law.[2]  Thus, notwithstanding the additional hurdles presented by the Second Circuit’s decisions, the Government’s decision not to pursue yet another trial against Litvak does not signal a death knell for all similar charges in the future, particularly those that are currently pending and arose as part of the Government’s RMBS probe.  But the somewhat torturous history of the Litvak case does highlight the difficulty for the Government in establishing the materiality of alleged misstatements made to sophisticated securities professionals who undertake their own analysis of trades.  Indeed, in many of these RMBS cases, the Government faced an uphill battle from the start, evidenced by its inability to secure convictions in many of them. Continue Reading Two Strikes and You’re Out: The Litvak Saga Comes to an End

The long-running criminal case against Jesse Litvak seems to have come to an end, with the U.S. Attorney’s Office for the District of Connecticut filing a motion yesterday seeking voluntary dismissal of the sole remaining charge.[1]  This action—which has resulted in the government twice obtaining a criminal conviction against Litvak, only to see both convictions overturned by the Second Circuit—raised somewhat novel questions of the materiality of information a broker-dealer provides about its own costs or profit margins to sophisticated counterparties.  Notably, even while seeking dismissal, the Government again reiterated its view that the legal theory it pursued, and which the Second Circuit twice appeared to credit, remains sound and (presumably) actionable in future cases.[2] Continue Reading Government Moves to Voluntarily Dismiss Remaining Charge Against Jesse Litvak, Foregoing a Third Trial

A federal district court in California has become the latest court to hold that the 10-year statute of limitations under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) for offenses “affecting a financial institution” extends to offenses committed by banks and their employees, not just offenses committed against them.  The decision is the latest chapter in a long-running debate between the Government and financial institutions that has played out in a series of federal court decisions over the last three years regarding interpretation of FIRREA.  While this is not the first decision to hold that the 10-year limitations period applies to offenses by financial institutions, it is the first outside of the Second Circuit. Continue Reading California District Court Holds that FIRREA’s 10-Year Statute of Limitations Reaches Risks Caused to Financial Institutions by Their Own Employees

On July 12 and 16, 2018, the U.S. Commodity Futures Trading Commission (“CFTC”) announced two awards to whistleblowers, one its largest-ever award, approximately $30 million, and another its first award to a whistleblower living in a foreign country.[1]  These awards—along with recent proposed changes meant to bolster the Securities and Exchange Commission’s (“SEC” or “Commission”) own whistleblower regime—demonstrate that such programs likely will continue to be significant parts of the enforcement programs of both agencies and necessarily help shape their enforcement agendas in the coming years. Continue Reading CFTC Announces Two Significant Awards by Whistleblower Program