SEC ANNOUNCES $17 MILLION WHISTLEBLOWER AWARD

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Washington D.C., June 9, 2016 — The Securities and Exchange Commission today announced a whistleblower award of more than $17 million to a former company employee whose detailed tip substantially advanced the agency’s investigation and ultimate enforcement action.

The award is the second-largest issued by the SEC since its whistleblower program began nearly five years ago.  The SEC issued a $30 million award in September 2014 and a $14 million award in October 2013.

“Company insiders are uniquely positioned to protect investors and blow the whistle on a company’s wrongdoing by providing key information to the SEC so we can investigate the full extent of the violations,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement.  “The information and assistance provided by this whistleblower enabled our enforcement staff to conserve time and resources and gather strong evidence supporting our case.”

Sean X. McKessy, Chief of the SEC’s Office of the Whistleblower, added, “In the past month, five whistleblowers have received a total of more than $26 million, and we hope these substantial awards encourage other individuals with knowledge of potential federal securities law violations to make the right choice to come forward and report the wrongdoing to the SEC.”

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 SEC’s whistleblower program has now awarded more than $85 million to 32 whistleblowers since the program’s inception in 2011.  Whistleblowers may be eligible for an award when they voluntarily provide the SEC with unique and useful information that leads to a successful enforcement action.  Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.  All payments are made out of an investor protection fund established by Congress that is financed through monetary sanctions paid to the SEC by securities law violators.  No money has been taken or withheld from harmed investors to pay whistleblower awards.

SEC ANNOUNCES WHISTLEBLOWER AWARDS

FROM:  SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission announced that three whistleblowers have been awarded more than $25,000 combined for tips and information they provided to help the SEC and Justice Department stop a sham hedge fund.

This is the first installment of anticipated payments to the whistleblowers as additional assets are collected from the purported hedge fund manager.  The whistleblowers are expected to ultimately receive approximately $125,000 in total.

The SEC issued an order earlier this summer rewarding each of the three whistleblowers with 5 percent of the money that the SEC ultimately collects from its enforcement action against Locust Offshore Management and its CEO Andrey C. Hicks.  In cases where there are related criminal proceedings in which money is collected by another regulator, a provision in the whistleblower rules allows whistleblowers to then additionally apply for an award based off the other regulator’s collections in what qualifies as a “related action.”  The Commission subsequently approved 5 percent payouts to each whistleblower for money collected in the related criminal action.

Hicks pled guilty on Dec. 12, 2012, to five counts of wire fraud and consented to the forfeiture of his interest in property previously seized by the Justice Department.  He was sentenced to 40 months in prison.  Approximately $170,000 has been administratively forfeited in the criminal proceeding – money that is deemed collected for purposes of issuing whistleblower awards.  Therefore, the three whistleblowers will now receive $8,505 each.  Additional payments can be made to these whistleblowers upon forfeiture of the additional assets that have been seized.

The aggregate value of assets seized from Hicks is estimated to be approximately $845,000, and the whistleblowers are expected to ultimately receive 15 percent of this amount for a combined total of approximately $125,000.

The SEC’s order does not identify the whistleblowers, whose confidentiality is protected under the SEC’s whistleblower program.  The order states that two of the whistleblowers provided information that prompted the SEC to open an investigation and stop the scheme before more investors were harmed.  The third whistleblower identified key witnesses and confirmed information the other two whistleblowers provided.

The SEC’s whistleblower program is authorized under the law to reward individuals who offer high-quality, original information that leads to an SEC enforcement action in which more than $1 million in sanctions is ordered.