SEC’s Historic $279 Million Whistleblower Bounty Makes for Three Consecutive Years of Record-Breaking Awards
On May 5, 2023, the Securities and Exchange Commission (“SEC”) announced that it had awarded a single whistleblower $279 million. This is the largest award made under the SEC’s Whistleblower Program by a long shot – more than double the now-second highest award, which stands at $114 million. In fact, this award is greater than all of the awards the SEC paid out to whistleblowers in 2022 combined (which totaled $229 million).
I. Three Years of Historic Whistleblower Awards
This recent award is also the largest award in history under any whistleblower program. This makes three years in a row where there has been a new record-breaking whistleblower award. In 2021, the Commodity Futures Trading Commission (“CFTC”) awarded just under $200 million to a single whistleblower who assisted the agency in its sprawling investigation of the LIBOR scandal. At the time, that was the largest whistleblower award in history. In 2022, a whistleblower who filed a False Claims Act lawsuit against biotech giant Biogen earned a $266 million realtor’s share award as part of Biogen’s $900 million settlement in the case, knocking the LIBOR award off the pedestal. This SEC award now dethrones the Biogen award. The high-water mark keeps on rising.
These awards not only reflect the remarkable financial incentives that exist for those that bring to light corporate malfeasance, but they also emphasize the growing breadth of the federal whistleblower programs – each of these nine-figure awards were provided via different whistleblower programs. Meanwhile, whistleblower programs are only expanding in scope. The Department of the Treasury recently launched its own whistleblower program, which is focused on violations of the Bank Secrecy Act and various sanctions laws. Whistleblowing is not slowing down, and it is a matter of when – not if – this $279 million award is eclipsed.
II. Latecomers Can Still Reap Massive Benefits if They Offer Significant Assistance to Regulators
Both the $200 million CFTC award and the $279 million SEC award involved individuals who blew the whistle after the agency had already begun to investigate the misconduct at issue. The SEC award will remind corporate insiders that whistleblowers can be handsomely rewarded for providing information to the government even when the government is already on the trail. Meanwhile, companies must continue to wrangle with the fact that, in the midst of an investigation, their own employees are financially incentivized to submit whistleblower tips to assist regulators.
The SEC’s award order, per agency policy, provided scant details on the underlying enforcement action. But it did provide insight into the rationale for the award figure. The agency explained that while the whistleblower had only come forward mid-investigation, he or she had provided valuable evidence which allowed the agency to expand its investigation, saved the agency time and resources, and provided substantial and ongoing assistance during the investigation. The SEC also recognized that the whistleblower had not provided information on all the misconduct at issue in its enforcement action. Despite all this, the whistleblower was still awarded an eyewatering $279 million. The order does not reveal the percentage of the recovery that the whistleblower was rewarded (that figure is redacted but can fall between 10% and 30% of the eligible recovery). However, the tenor of the order suggests that the whistleblower could have earned a higher percentage and thus an even larger award than $279 million (e.g., had the whistleblower blew the whistle before the investigation began).
III. Sending a Clear Message
As with any record shattering bounty, this award will send a message to companies and potential whistleblowers alike. The award will remind those with valuable information of the existence of the SEC’s increasingly vital and increasingly lucrative whistleblower program. That will lead to more whistleblower tips to the SEC and other agencies and, consequently, more enforcement actions and more headaches for regulated entities.