Securities and Exchange Commission announces largest award $30 million to whistleblower

The Securities and Exchange Commission today announced an award of more than $30 million to a whistleblower, living in a foreign nation, who provided key original information that led to a successful SEC enforcement action. The award is the largest made by the SEC’s whistleblower program to date and the fourth award to a whistleblower living in a foreign country, demonstrating the program’s international reach.

The anonymous whistleblower will receive more than double the previous record whistleblower award after providing information that led directly to an SEC enforcement.The U.S. Securities and Exchange Commission whistleblower program that went into effect three years ago.

The government will fork over more than $30 million to one anonymous whistleblower who provided information that led directly to enforcement in an undisclosed securities case, the SEC said Monday. The agency is required by law to protect whistleblowers’ identities, which results in a dearth of information being released with regard to the tipsters and the frauds they help the government uncover.

“This whistleblower came to us with information about an ongoing fraud that would have been very difficult to detect,” Andrew Ceresney, director of the SEC’s enforcement division, said in an unsurprisingly cryptic statement. “This record-breaking award sends a strong message about our commitment to whistleblowers and the value they bring to law enforcement.”

The award more than doubles the previous record for a whistleblower payout, which came in the form of a $14.7 million award announced last October. That whistleblower was initially anonymous, but a recent lawsuit actually unveiled the tipster’s identity as that of Global Capital Markets Advisors principal Michael Sears. The court fight made headlines this summer as Sears’ business partner, John Tung, sued him for part of the SEC award, which Tung claimed Sears had promised to share after he provided the government with information that helped shut down a fraud involving the federal visa-for-sale program.

The SEC’s whistleblower awards generally amount to anywhere from 10% to 30% of the amount of money collected from the relevant securities case, with a possibility for future payments should the government subsequently collect even more money from a defendant. The SEC’s whistleblower order does not identify what percentage of the total collected funds that the award represents, though the order does note that the whistleblower actually challenged the size of the award by claiming that it falls short of the average percentage amount awarded by the SEC. However, the SEC notes in its order that the award might have been even higher had the whistleblower reported the violations in a more timely fashion.

The SEC also notes that Monday’s award goes to the fourth foreign whistleblower to participate in the agency’s program, which whistleblower chief Sean McKessy says “shows the international breadth” of the program. Monday’s announcement also marks the ninth whistleblower award handed out so far this year. In June, the SEC said it would give two anonymous tipsters a total of $875,000.

“This whistleblower came to us with information about an ongoing fraud that would have been very difficult to detect,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement.  “This record-breaking award sends a strong message about our commitment to whistleblowers and the value they bring to law enforcement.”

Sean McKessy, Chief of the SEC’s Office of the Whistleblower, added, “This award of more than $30 million shows the international breadth of our whistleblower program as we effectively utilize valuable tips from anyone, anywhere to bring wrongdoers to justice.  Whistleblowers from all over the world should feel similarly incentivized to come forward with credible information about potential violations of the U.S. securities laws.”

The SEC’s whistleblower program rewards high-quality, original information that results in an SEC enforcement action with sanctions exceeding $1 million.  Whistleblower awards can range from 10 percent to 30 percent of the money collected in a case.  The money paid to whistleblowers comes from an investor protection fund established by Congress at no cost to taxpayers or harmed investors.  The fund is financed through monetary sanctions paid by securities law violators to the SEC.  Money is not taken or withheld from harmed investors to pay whistleblower awards.

By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.  The previous high for an SEC award to a whistleblower was $14 million, which was announced in October 2013.

The SEC awarded its first whistleblower under the program following its inception in fiscal year 2012.  The program awarded four more whistleblowers in FY 2013, and has awarded nine whistleblowers in FY 2014.

Jeffrey Newman represents whistleblowers