Whistleblower Awarded $5.5 Million for Disclosing a Financial Scheme to the Securities and Exchange Commission

The Securities and Exchange Commission announced in January of 2017 that a whistleblower who worked for the scheming company had been awarded $5.5 million for providing useful information to the SEC. The information helped the SEC stop the scheme and protect investors.

The SEC whistleblower law went into effect in 2011, after the passage of the Dodd–Frank Wall Street Reform and Consumer Protection Act. The purpose of the law is to encourage employees and others who are aware of SEC fraud or any violation of the SEC rules to disclose that fraud or violation to the government. Example of SEC fraud include:

  • Reporting and Disclosure Violations
  • Fraud and Ponzi schemes
  • Violations of the Foreign Corrupt Practices Act

The SEC and other government agencies such as the IRS and the US Department of Defense rely on whistleblowers because the government simply doesn’t have the resources to discover all the fraud that is taking place nationwide.

Whistleblower financial incentive

The incentive for whistleblowers is that if the SEC takes the tip, investigates the tip, and then brings a successful enforcement action, the whistleblower gets a share of the monetary sanctions. The amount recovered has to be more than $1,000,000. The whistleblower gets 10 to 30 % of the recovery if the information provided was unique and helped the SEC.

According to the SEC Office of the Whistleblower, well over $100 million in whistleblower awards have been granted since the law began.

How an attorney can help

Whistleblower laws are complicated – which is why most whistleblowers engage a lawyer to help them understand what types of tips the SEC is looking for, how to file the claim, what steps to take to help the SEC with its investigation, and how to properly request a whistleblower award.

Whistleblower filings must be voluntary. Nondisclosure of the identity of the whistleblower is a primary concern of the lawyer and the SEC. If an employer retaliates by firing the employee or creating a hostile work environment, the SEC does allow the employee to bring a retaliation action against the whistleblower.