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  • SEC issues $50 million, whistleblower award, highest ever to one individual

    Securities

    On June 4, the SEC announced a nearly $50 million award to a whistleblower in an enforcement action, the largest amount ever awarded to one individual under the SEC’s whistleblower program. According to the SEC’s order, in applying the reward criteria, the SEC determined that the whistleblower (i) provided information that was “highly significant” and contained first-hand observations of misconduct that was previously unknown; (ii) laid out “in detail substantial aspects” of the misconduct and provided a roadmap for the SEC’s investigation; and (iii) provided information that helped the SEC return a significant amount of money to those harmed by the misconduct. The agency’s next largest awards were given in 2018 when the SEC awarded $50 million to two joint whistleblowers in March and $39 million to a single whistleblower in September, covered by InfoBytes here and here.

    As of June 4, the SEC has awarded 83 individuals a total of over $500 million in whistleblower awards since its first award in 2012.

    Securities SEC Whistleblower Enforcement

  • SEC settles with blockchain company over unregistered ICO

    Securities

    On May 28, the SEC announced a settlement with a California-based blockchain services company resolving allegations that the company conducted an unregistered initial coin offering (ICO) of digital asset securities. According to the order, the company raised over $25 million by selling “Consumer Activity Tokens” to nearly 9,500 investors, including U.S. investors, to raise capital to “develop, administer, and market a blockchain-based search platform for targeted consumer advertising.” The company allegedly told investors that the tokens would increase in value and made the tokens available on third-party digital asset trading platforms after the ICO. However, the SEC found that the tokens constituted securities, and that the company allegedly violated Sections 5(a) and 5(c) of the Securities Act by distributing the tokens without having the required registration filed or in effect, nor did it qualify for an exemption to the registration requirements.

    The order, which the company consented to without admitting or denying the findings, imposes a $400,000 penalty, and requires the company to disgorge $25.5 million and pay approximately $3.4 million in prejudgment interest. Additionally, the company is required to surrender all its remaining tokens to the fund administrator so they can be permanently disabled, publish notice of the order, and request the removal of the distributed tokens from all digital asset trading platforms.

    Securities Digital Assets SEC Enforcement Initial Coin Offerings Securities Exchange Act

  • SEC issues $2 million whistleblower award

    Securities

    On May 4, the SEC announced a nearly $2 million award to a whistleblower in an enforcement action. According to the SEC’s press release, the whistleblower’s “information and assistance helped the agency bring a successful enforcement action and allowed investors to recover much of their money.” The formal order also states that the whistleblower, among other things, provided new information regarding an investigation into ongoing fraud, which informed the SEC’s need to “expeditiously seek a temporary restraining order and asset freeze to prevent further investor loss.” The whistleblower also suffered hardships. 

    As of May 4, the SEC has awarded 82 individuals a total of approximately $450 million in whistleblower awards since its first award in 2012.

    Securities SEC Whistleblower Enforcement Investigations

  • SEC issues $18 million whistleblower award

    Securities

    On April 28, the SEC announced an award of more than $18 million to a whistleblower in an enforcement action. According to the SEC’s press release, the whistleblower’s “significant information prompted an examination that resulted in an important enforcement action.” The formal order also states that the whistleblower, among other things, relayed information that alerted SEC staff to potential securities violations, and repeatedly raised concerns internally “in an attempt to immediately correct the problem,” which led to the whistleblower suffering hardships as a result. The SEC further emphasizes that the enforcement action resulted in millions of dollars being returned to retail investors.

    As of April 28, the SEC has awarded 81 individuals a total of approximately $448 million in whistleblower awards since its first award in 2012.

    Securities Whistleblower Enforcement SEC Investigations

  • SEC issues multiple whistleblower awards

    Securities

    On April 20, the SEC announced a $5 million award to a whistleblower in an enforcement action. According to the SEC’s press release, the whistleblower “provided critical evidence of wrongdoing, which helped save time and resources in the SEC’s investigation.” The formal order also states that the whistleblower “promptly reported the information” and “suffered a unique hardship” by being terminated shortly after raising concerns internally.

    Earlier on April 16, the SEC announced an award of more than $27 million to a whistleblower in an enforcement action. According to the SEC’s press release, the whistleblower provided “critical investigative leads,” tied in part to misconduct occurring overseas, that “advanced the investigation and saved significant Commission resources.” The formal order also stated that the whistleblower, among other things, provided substantial assistance and cooperation, relayed information that “helped the Commission further significant law enforcement interests,” and “repeatedly and strenuously” raised concerns about internal misconduct within the whistleblower’s organization. The award is the sixth largest overall award since the program began.

    According to the SEC, as of April 20 it has awarded 80 individuals a total of approximately $430 million in whistleblower awards since its first award in 2012.

    Securities Whistleblower Enforcement SEC

  • SEC issues $2 million whistleblower award

    Securities

    On April 3, the SEC announced an approximately $2 million award to a whistleblower in an enforcement action. According to the SEC’s press release, the whistleblower “provided vital information and assistance that substantially contributed to an ongoing investigation” that would otherwise have “been difficult for the agency to obtain absent the tip.” The formal order also states that the whistleblower “expeditiously reported the information” despite implied threats and suffering hardships, and that the law-enforcement interests in this investigation were high.

    As of April 3, the SEC has awarded 78 individuals a total of approximately $398 million in whistleblower awards since its first award in 2012.

    Securities SEC Whistleblower Enforcement

  • SEC announces $450,000 compliance-related whistleblower award

    Securities

    On March 30, the SEC announced a $450,000 award to a whistleblower in an enforcement action. According to the formal order, the whistleblower—who had compliance-related responsibilities at the company at issue in the enforcement action—suffered “unique hardships” after first attempting to report concerns within the company’s internal compliance structure. The whistleblower then reported the information to the SEC following the required 120-day time waiting period, which ultimately provided assistance to the SEC’s investigation and successful enforcement action. The SEC stated in its press release that this is the third whistleblower award given to an individual with compliance or internal audit responsibilities. As of March 30, the SEC has awarded 77 individuals a total of approximately $396 million in whistleblower awards since its first award in 2012.

    Securities SEC Whistleblower Compliance Enforcement

  • SEC issues multiple whistleblower awards

    Securities

    On March 24, the SEC announced awards of over $570,000 to two whistleblowers for providing “significant information and assistance that helped the Commission bring multiple successful enforcement actions.” According to the formal order, the first whistleblower received an award of approximately $478,000, and the second whistleblower received an award of approximately $94,000. The SEC stated that the first whistleblower’s award was substantially higher because the information (i) helped the SEC bring antifraud charges related to conduct that was ongoing at the time the whistleblower reported the information to the SEC; (ii) played a critical role in the development of the case; and (iii) related to all the enforcement actions. In comparison, the second whistleblower’s information—while important—contributed to charges brought against only one of the respondents, the SEC stated.

    Earlier on March 23, the SEC announced an award of over $1.6 million to a whistleblower in an enforcement action. According to the SEC’s press release, the whistleblower “provided helpful assistance early in the investigation, preserving Commission time and resources,” and “helped form part of the basis for charges brought in a successful enforcement action.” The formal order—which acknowledged that the allegations reported by the whistleblower “would have been hard to detect”—stated, however, that while the whistleblower “unreasonably delayed” reporting the allegations, the SEC chose not to factor in the delay as severely as it might have done had the delay occurred entirely after the Dodd-Frank Act established the whistleblower award program.

    The SEC’s March 24 press release states that it has awarded 76 individuals a total of approximately $396 million in whistleblower awards since its initial award in 2012.

    Securities SEC Whistleblower Enforcement Regulator Enforcement Investigations

  • SEC settles with investment entities over ETF recommendations

    Securities

    On February 27, the SEC announced a settlement with a national bank to resolve allegations that two of its investment entities failed to monitor sales of exchange-traded funds (ETFs) to retail investors. The SEC alleged in its order that the bank’s compliance policies and procedures and supervisory processes were unable to adequately prevent and detect unsuitable recommendations of single-inverse ETFs, which allegedly led to bank investment advisors making recommendations to certain clients who were unaware of the risk of losses when ETFs are held long term. While the bank neither admitted nor denied the SEC’s findings, it agreed to pay a $35 million penalty and distribute funds to affected clients. The bank also agreed to cease and desist from engaging in any future violations of the relevant provisions.

    Securities SEC Exchange-Traded Funds Broker-Dealer Compliance

  • SEC issues $7 million whistleblower award

    Securities

    On February 28, the SEC announced an award of over $7 million to a whistleblower in an enforcement action. According to the SEC’s press release, the whistleblower “provided extensive and sustained assistance, such as identifying witnesses,” which was “critically important to the success of [the] enforcement action.” The formal order also states that the whistleblower helped the SEC “understand complex fact patterns” and that “[t]he whistleblower’s information and assistance helped the SEC staff devise an investigative plan, craft document requests, and ultimately bring an important enforcement action focusing on serious financial abuses.”

    The SEC’s press release states that it has awarded 73 individuals a total of approximately $394 million in whistleblower awards since 2012.

    Securities SEC Whistleblower Enforcement Investigations

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