$3 Million paid to mystery SEC whistleblower

by Kurt Schulzke

Be advised: The SEC is serious about guarding identities of SEC whistleblowers, but maybe not so serious about backing up claimed awards. Today’s SEC announcement of a $3 million-plus whistleblower award sounds great but, except for the fact and amount of the alleged award, provides scant information. The SEC’s press release offers a few additional data points:

The Securities and Exchange Commission today announced a whistleblower award of more than $3 million to a company insider whose information helped the SEC crack a complex fraud.  The multi-million dollar payout is the third highest award to date under the SEC’s whistleblower program.

The whistleblower’s specific and detailed information comprehensively laid out the fraudulent scheme which otherwise would have been very difficult for investigators to detect. The whistleblower’s initial tip also led to related actions that increased the whistleblower’s award.

“Insiders may hold the key to helping our investigators unlock intricate fraudulent schemes,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement.  “By providing significant financial incentives for people to come forward, the SEC’s whistleblower program continues to be profoundly effective in helping us protect investors and hold wrongdoers accountable.”

So this was a “complex” “fraudulent scheme” tied to other deals (“related actions”), all of which the SEC would have been unlikely to uncover if not for the “insider” whistleblower. Nice. But what percentage of the SEC’s own recoveries did the SEC award to this whistleblower? The statute allows for between 10 and 30 percent. The SEC’s order doesn’t say.

There is no way to verify that the award was made. It might all be a hoax. Not likely, but possible. For what it’s worth — close to nothing — the SEC order determining the award can be accessed here. We can assume that this award was made pursuant to a Form WB-APP that must have been filed no later than maybe January 2015 (assuming a six-month interval to consider the award) in response to an SEC Notice of Covered Action that would have been posted sometime during the 90 days preceding the filing of the Form WB-APP.

Note well: Despite the SEC’s own efforts to keep mum on whistleblower identities, prospective SEC whistleblowers should not expect not to be “outted” eventually. The wisest course of action for any whistleblower is to line up a new job very early in the process, perhaps before blowing the whistle in the first place.



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