SEC Issues Its Second Whistleblower Award
On June 12, 2013, the SEC issued its second whistleblower award and a top SEC official has predicted additional larger awards will soon be forthcoming. The award was issued in connection with an enforcement action against Andrey Hicks and his company, Locust Offshore Management, LLC. The SEC charged that both Hicks and Locust sold shares in a pooled investment fund that turned out to be fictitious. A default judgment was entered against the defendants and they were ordered to pay approximately $7.5 million for disgorgement and prejudgment interest. The Commission entered an order awarding 15% of any recovery to three of four whistleblowers who made claims under the SEC’s whistleblower program. The three will each receive a 5% share of the amounts collected. A fourth claimant was denied an award because he provided vague and non-specific allegations, which did not concern the fraud actually uncovered. Accordingly, the Commission concluded that the information submitted did not cause the Commission to open an investigation and did not significantly contribute to the success of the enforcement action. As to the remaining three whistleblowers, two provided sufficient information that caused the Commission to open an investigation while the third confirmed the information and identified key witnesses.
On a related note, Division of Enforcement Associate Director Stephen Cohen, who is intimately involved in the SEC’s whistleblower program, reported on May 3 that the agency plans to announce additional awards by the end of 2013. The SEC has already posted 51 notices of potential award on its website.