Why Whistleblowers Are Critical in Exposing Securities Fraud

November 10, 2023
Why Whistleblowers Are Critical in Exposing Securities Fraud

SEC Fraud Cases Resulting in Billions in Whistleblower Awards

Observing questionable actions, or inactions, in a securities or financial-based business or agency where you are employed is neither something you wanted to see, nor something you can’t unsee. When questionable behavior is allowed to go on without consequences, continually causing inevitable harm to others, the bad behavior must be reported. The SEC Whistleblower Program was developed to persuade and protect a whistleblower who has chosen to report securities violations to the Securities & Exchange Commission (“SEC”). The whistleblower cannot be the subject of retaliation for reporting such behavior based on the strident anti-retaliation provisions of the statute. Further if using an SEC whistleblower law firm, you can file the matter anonymously and most likely stay anonymous from start to finish

Prior to reporting, it is advised that a potential “whistleblower” seek information and guidance from an established SEC whistleblower attorney. Whistleblowing protections cover disclosures done in the right manner about legal violations of laws, rules, and regulations.

The U.S. Securities and Exchange Commission (“SEC”) has operated since 1934, the time of the Great Depression. At a time of corruption and great loss, the SEC’s mission was to keep up with the ever-changing market and strive to develop full confidence of the Market participants and the investing public with equal attention to both. It is always a complicated relationship as long-term investors seek to plan for their futures and the life events that come along. Investment firms who want to take investors’ money and develop them to a greater value before returning them to the investors. The U.S. capital markets are deep, dynamic and the most liquid in the world. Overseeing over $100 trillion in securities trading on U.S. equity markets annually, it is the SEC’s job to be responsive and innovative.

Monitoring the market’s ever changing environment entails constant adjustment and modernization of financial rules, regulations, oversight tools and activities. As a government agency, the SEC is overwhelmed. It can only be assumed that what is brought to the legal forefront, while holding accountable those market participants opting to stretch the parameters of investing money, is but a drop in the bucket in the U.S. financial market. Congress responded, in 2010, with the SEC whistleblower program to encourage individuals to report sustainable tips to the Commission. The SEC’s purpose was to protect both the investors and the marketplace. Between the inception of the program and 2022, enforcement of matters brought to the attention of the SEC by individual/whistleblowers has resulted in more than $5.0 billion in monetary sanctions – and awards of more than $1.3 billion in SEC whistleblower rewards to “meritorious whistleblowers” under the program.1 The Federal government often has to depend on the first-hand knowledge of an individual insider to right the wrongs in the often volatile capital markets. Doing what is right can have some significant rewards.

Whistleblowers are critical in exposing Securities Fraud. Whistleblowers can act as a springboard for an investigation or they can propel forward an already existing investigation. At

times, the whistleblower brings information to the table that provides pertinent information to more than one federal agency (e.g., the SEC and Department of Justice) On April 30, 2018, Panasonic agreed to pay $280 Million ($143 million to the SEC and $37 million to the DOJ – resolving charges of accounting fraud and the Foreign Corrupt Practices Act (“FCPA”) involving Panasonic’s Global Avionics subsidiary. The SEC issued a $28 million SEC whistleblower award to the whistleblower in May of 2021.

While, in the case of SEC whistleblower cases, tips can be submitted to the SEC to begin the process, it is very valuable to retain the services of a successful SEC Whistleblower attorney from an established SEC Whistleblower law firm – establishing anonymity and protection from retaliation. An established SEC Whistleblower attorney will also present your violation concerns in the best light regarding Federal securities laws & regulations overseen by the SEC for possible violations include:

  • Accounting, investment, and securities fraud
  • Insider trading
  • Foreign bribery and other FCPA violation
  • Security price or volume manipulation
  • Fraudulent and/or unregistered securities offerings / Ponzi schemes
  • Hedge fund, investment advisor, and auditor independence fraud
  • Anti-money laundering violations
  • False and misleading assessments of investments/companies
  • Blockchain fraud
  • Improper revenue recognition and deceptive financials
  • Misleading cybersecurity disclosures

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    SEC Whistleblower Awards

Whistleblower awards can range from 10 to 30% of the money collected when the monetary sanctions exceed $1.0 million.2 Representation by an attorney experienced in SEC Whistleblower matters can aid in negotiation of the award based on the whistleblower’s initial tips and continuing assistance in the investigation. Payments to whistleblowers are made out of an investor protection fund, established by Congress, and financed entirely through monetary sanctions paid to the SEC by securities laws violators. No money is taken or withheld from harmed investors to pay whistleblower awards.

Here are some representative SEC whistleblower awards

May 5th, 2023: Nearly $279 million to a whistleblower whose information and assistance led to the successful enforcement of SEC and related actions. (The whistleblower provided ongoing information that allowed the SEC to expand the scope of the misconduct charged and allowed the SEC to disgorge more than $4.0 billion in ill-gotten gains and interest for investors.)

October 22, 2020: $114 Million

September 15, 2021: $110 Million

April 15, 2021: $50 Million

March 19, 2018: $50 Million

June 4, 2020: $50 Million

September 6, 2018: $39 Million

December 19, 2022: $37 Million

March 26, 2019: $37 Million

September 24, 2021: $36 Million

A lot is at stake for the government and the whistleblower. An experienced SEC whistleblower law firm and SEC whistleblower lawyer can provide proper information, guidance, anonymity, and protection from retaliation while seeking the best possible outcome and award for the client.