May 10, 2023

SEC announces largest ever whistleblower award

The US Securities and Exchange Commission has announced the largest whistleblower award ever.  The $279 million award was granted to an individual following successful enforcement actions by the SEC and another agency.

According to the SEC order, the covered action brought by the SEC resulted in a final judgment against the defendant company, including disgorgement and prejudgment interest;  the two related actions brought by another agency also resulted in monetary sanctions against the company, and the award represents a percentage of the payments in all three actions.  The whistleblower “voluntarily provided original information” that caused the SEC to expand its investigation.  The information, while important, was limited in scope, and was communicated to the SEC after the agency had become aware of potential misconduct – presumably resulting in a lower percentage than more timely or broader information might have done.  Nevertheless, the whistleblower’s information saved the agency time and resources, and during the course of the investigation, the whistleblower provided substantial ongoing assistance, including several written submissions, communications and interviews.

While granting the whistleblower’s claim, the SEC denied requests by three other claimants.  One of these did not contest the SEC’s preliminary determination and is therefore not discussed in the order.  The other two claimants were denied any award because, according to the SEC, the information they provided did not qualify under Section 21F of the Securities Exchange Act of 1934, which makes a whistleblower’s eligibility for an award resulting from an enforcement action related to a covered action dependent upon eligibility in the original enforcement action.  The SEC accepted as true a sworn declaration by one of the investigating attorneys confirming that Claimant 2’s information did not advance the investigation and was not used to bring charges against the company.  Nor did the claimant follow the reporting procedures outlined in Rule 21F-4(c).  Therefore, the SEC concluded that Claimant 2 had not voluntarily provided original information that led to the original covered enforcement action, and he or she was thus not eligible for an award based on the related enforcement actions.  As for Claimant 3, the SEC denied his or her claim for similar reasons, stating that the information provided by Claimant 3 did not cause the agency to commence an examination, open or reopen an investigation, and did not significantly contribute to a successful covered action.

To-date, the SEC had awarded more than $1 billion to whistleblowers whose tips and cooperation have resulted in over $6 billion in financial remedies.  The current whistleblower’s award is more than double the next-largest award, $114 million announced by the SEC in October 2020.  As stated by Gurbir Grewal, Director of the SEC’s Division of Enforcement, the success of the whistleblower program, established by the Dodd-Frank Wall Street reform and Consumer Protection Act, “directly benefits investors,” as it results in “orders requiring bad actors to disgorge …  ill-gotten gains and interest.”

SEC press release | SEC order | Tips and Awards graphic