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Whistleblower Gets $13 Million For Revealing Corporate Fraud

January 7, 2022 by Tom Ramstack
Whistleblower Gets $13 Million For Revealing Corporate Fraud
The U.S. Securities and Exchange Commission in Washington, D.C. (Photo by Dan McCue)

WASHINGTON — The Securities and Exchange Commission this week announced its first whistleblower award of 2022 in its crackdown on corporate fraud.

The federal agency paid $13 million to a tipster whose information led the Securities and Exchange Commission to shut down a corporate fraud scheme.

The whistleblower cooperated extensively with staff members, helped them to understand “the mechanics of the fraudulent scheme” and assisted in helping the agency obtain relief for investors, according to Nicole Creola Kelly, who heads the SEC’s whistleblower office.

“Whistleblowers who provide information swiftly can not only save SEC staff’s time and resources, but also help minimize potential investor losses,” Kelly said in a statement.

The SEC is a federal agency that enforces financial regulations against market manipulation. It is assigned to protect investors, maintain efficient markets and promote capital formation.

The SEC did not identify the tipster or the corporation. Last year, the SEC awarded $564 million to 108 whistleblowers.

The agency’s annual report shows that multimillion-dollar whistleblower awards are becoming more common. In fiscal year 2021, the SEC awarded more money than all previous years since the whistleblower program was founded a decade ago.

One of the awards last year was for $110 million. The agency does not announce the corporations that were targeted or details of its investigations.

The awards are calculated as a percentage of the money the agency collects after fraud enforcement.

First, the SEC determines whether whistleblowers are eligible based on whether they provided “original, timely and credible” evidence that leads to successful enforcement. The awards then range between 10% to 30% of the money collected when fines exceed $1 million.

Tipsters who submit three or more frivolous claims are permanently banned from receiving awards.

SEC officials say rule amendments in 2020 streamlined procedures for whistleblower awards, leading to the record year in 2021.

Tom can be reached at tom@thewellnews.com.

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