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SEC Issues Its Largest Whistleblower Award Yet, Indicative of Massive Fraud

On May 5, 2023, the SEC—the agency that regulates the securities market—revealed that it granted a whistleblower an award of approximately $279 million, the largest award yet made by the agency to a whistleblower. This award far surpasses what was, until now, the highest award granted to a whistleblower of $114 million in 2020.

Such a large award reveals the enormous scope of the fraud that the whistleblower’s information helped uncover. The SEC’s Whistleblower Program provides for awards of 10 to 30 percent of the money collected by the SEC in an enforcement action where the agency collects over $1 million in sanctions. Therefore, an award of $279 million indicates that the SEC’s recovery in the fraud, and the recoveries in any related actions by other agencies, may have been somewhere between $930 million and $2.79 billion.

The SEC’s Order reveals that other enforcement agencies also brought “related actions”—an enforcement action brought by a different agency based on the same fraud—and recovered money from those related actions. The SEC Whistleblower Program allows whistleblowers to receive awards from money collected in related actions, which is what occurred here.

While the SEC does publish every successful enforcement action it undertakes, the agency does not disclose what other agencies recovered money in the related action and which whistleblower awards are connected to specific enforcement actions the agency takes.

The SEC’s Order also details the important role the whistleblower played in assisting the SEC in the action. According to the Order, the whistleblower’s information caused the SEC to expand the scope of the investigation and saved the SEC significant time and resources in the investigation. The whistleblower provided the SEC with multiple written submissions, communications, and participated in interviews with the SEC. This underscores the importance of the collaborative relationship between the agency and the whistleblowers that come forward with valuable information about frauds that the SEC may not have access to.

Whistleblower awards, including the award in this matter, are paid from an Investor Protection Fund established as part of the Dodd-Frank Act. The Investor Protection Fund is funded by monetary sanctions collected by the SEC in enforcement actions, and does not use taxpayer dollars or money that would otherwise go to harmed investors to pay whistleblower awards.

The scale of the fraud in this action and related actions, and the resultant whistleblower award, is a sign that the Whistleblower Program is fulfilling its purpose of encouraging whistleblowers to submit high-quality tips on fraud to the SEC and assist the agency with its enforcement efforts. Many financial frauds would never go reported to the SEC or other authorities if not for the efforts of whistleblowers, who often bring insider information to the agency that it would not otherwise have known.

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