C-Quest’s cookstove project seemed like a win-win: a low-cost carbon credit initiative with the promise of real climate impact and better living conditions for impoverished communities in Mozambique. The project? Distribute cheap, efficient cookstoves that use less wood than traditional campfires. These stoves were expected to reduce deforestation, cut carbon emissions, and lower the risk of lung damage from smoke inhalation. The catch? Hardly anyone ended up using the cookstoves, for a combination of reasons that reflected the poor craftmanship of the stoves and a fundamental misunderstanding of the people they were designed to “help.” But that didn’t stop C-Quest from falsely reporting widespread usage of the stoves. This allowed them to exaggerate the program’s carbon reductions and sell “phantom” carbon credits—which were then purchased by major corporations to offset their emissions.

Now the Government is going after C-Quest and its senior management for fraud. The Department of Justice has filed criminal charges against Kenneth Newcombe, C-Quest's former CEO, and Tridip Goswami, head of its carbon accounting team. It also announced that former COO Jason Steele pleaded guilty and was cooperating in the Government’s investigation. The SEC and CFTC both settled charges against C-Quest—the former for offering fraud and the latter for false reporting on carbon emissions reductions. The CFTC also took action against Newscombe and Steele.

These are the CFTC's first enforcement actions for voluntary carbon credit fraud. Just months earlier, the CFTC’s Whistleblower Office issued an alert on fraud in the carbon offsets market, spotlighting misconduct related to manipulative and wash trading, ghost credits, double counting, misrepresentations of material terms, and manipulation of tokenized carbon markets. At the time, CFTC Chairman Rostin Behnam emphasized that “the agency is building upon its expertise to ensure . . . its ability to identify and pursue any potential fraud or abusive practices.”

These kinds of fraud schemes come at a huge cost to all of us by displacing genuine climate impact projects. The DOJ alleges C-Quest fraudulently obtained tens of millions of dollars’ worth of carbon credits and sold them to unsuspecting purchasers. That’s tens of millions of dollars—or more—that could have been put towards initiatives that actually reduced carbon emissions.

The scheme also dehumanized the very communities it claimed to uplift, exposing the "savior complex” that too-often undermines extraterritorial “social good” projects. One cookstove recipient felt the stove “look[ed] like something a poor person would have”:

People with more income wouldn’t be proud to use this thing. . . . If you want to help someone, you have to help them leave poverty. Bring us a proper stove.

Investigative journalists at the Washington Post, including Chico Harlan, played a pivotal role in bringing this fraud to light. The news organization sent reporters to Mozambique to visit the cookstove recipients and found hardly anyone was still using them. The reporters were only able to audit C-Quest’s claims because a spreadsheet of the recipients with their contact information was accidentally published online. It appears that C-Quest voluntarily self-disclosed the issues after the Washington Post’s reporting—begging the question of whether any of this would have come to light but for the accidental publication of the cookstove spreadsheet. Given our line of work as whistleblower lawyers, I question whether this "accidental" publication was truly a mistake—perhaps it was the deliberate act of a whistleblower determined to expose the fraud.

CFTC Enforcement Director Ian McGinley aptly noted that whistleblowers are “invaluable allies” in efforts to fight fraud and manipulation in carbon markets. To encourage their efforts, the agency offers whistleblowers rewards ranging from 10 to 30 percent of the monetary sanctions it collects. As the C-Quest cookstove con underscores, by enlisting the help of whistleblowers, the CFTC’s protection of carbon markets is poised to be cooking with gas.