[HN Gopher] SEC issues more than $17M award to a whistleblower
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SEC issues more than $17M award to a whistleblower
Author : chmaynard
Score : 152 points
Date : 2022-07-19 19:16 UTC (3 hours ago)
(HTM) web link (www.sec.gov)
(TXT) w3m dump (www.sec.gov)
| chernevik wrote:
| The lack of information about who got the award and why seems
| like a huge problem.
|
| Who's to say that someone at the SEC didn't get a kickback for
| this? Or that this didn't go to some friend of the President?
|
| Whoever this is, they didn't inform on the mob. Maybe disclosure
| would be awkward for them professionally -- but with $17mm in
| hand, I'm not sure how much that matters.
| missedthecue wrote:
| Whistle blowers have gotten death threats before, hence the
| privacy.
| wmf wrote:
| Maybe if someone inside the SEC finds corruption they can get a
| meta-whistleblower award.
| giaour wrote:
| There's probably an exclusion in the law that prevents
| employees of the SEC from getting a bounty. But the SEC IG
| would absolutely investigate a report of something like that,
| and the civil service has robust protections for
| whistleblowers against retaliatory actions like getting fired
| or demoted.
| snarf21 wrote:
| I think whistle blowers should potentially even be eligible for
| WitSec. These people are likely giving up their career and
| ability to provide for their family. This is the least we can
| do for their service.
| res0nat0r wrote:
| I'm sure if the whistleblower thinks their name should be
| public, they'll do an interview somewhere soon. It's good the
| SEC doesn't treat this like you're winning the lottery, and
| requiring you do a press conference holding a big check for
| free PR for Powerball.
| fdgsdfogijq wrote:
| This sounds like a terrible way to disincentivize whistle
| blowing. Could easily ruin your career or be life threatening
| peteradio wrote:
| Interesting there is zero information what the award is for
| precisely, is that typical? It's described as "covered" and
| "related" actions.
| rkagerer wrote:
| Would disclosing which case it is harm their anonymity? Could
| you figure it out just hunting for recent enforcement actions
| in the right ballpark?
|
| Edit: Looks like guga42k did exactly that in a different
| comment.
| ademarre wrote:
| From the post:
|
| _> "As set forth in the Dodd-Frank Act, the SEC protects the
| confidentiality of whistleblowers and does not disclose any
| information that could reveal a whistleblower's identity."_
| peteradio wrote:
| Fair enough, but it leaves little to discuss but the amount
| awarded.
| elil17 wrote:
| The information is withheld because they protect the anonymity
| of the whistleblower. The point of the article is to remind
| people that financial regulators take care of their informants,
| both financially and in terms of privacy.
| ourmandave wrote:
| _As set forth in the Dodd-Frank Act, the SEC protects the
| confidentiality of whistleblowers and does not disclose any
| information that could reveal a whistleblower's identity._
|
| Just have to start scanning for $17M bank deposits.
|
| Wonder what the violation(s) were and how much they fined
| whatever entity. And if anybody is working on their backhand
| before they go to white-collar prison.
|
| [Edit] Down voting me is like a _backhanded_ compliment. Just
| sayin '...
| Akronymus wrote:
| Could be a small amount every x days?
| cheaprentalyeti wrote:
| > Could be a small amount every x days?
|
| I thought "structuring" was illegal.
|
| Hmm, maybe they could be paid in bitcoin?
| HWR_14 wrote:
| Structuring is illegal if it's designed to avoid federal
| reporting thresholds. You're perfectly able to structure
| your payments as long as each one is above $10,000 US
| without it triggering any US law. I believe there is also
| paperwork you can fill out to structure payments below
| $10,000 apiece (the reason you have to fill out paperwork
| in that case is to prove the reason for the many smaller
| payments wasn't to avoid the bank filling out that
| paperwork on your behalf.)
|
| Meanwhile, lottery winners, people employed at a business
| and many others receive money at regular intervals.
| giaour wrote:
| It's the government; couldn't they just hand the
| whistleblower a $17MM stack of paper treasury bonds? (Or,
| more realistically, credit $17MM of bonds to the
| whistleblower's treasury direct account.)
| Akronymus wrote:
| Never heard about "structuring" before. Gonna have to look
| it up.
| rsstack wrote:
| I don't think anti-money laundering laws apply to federal
| agencies. The SEC isn't hiding this payment from the IRS,
| in this hypothetical scenario they are just hiding it from
| the bank employees. In reality, I don't think any bank
| employee is going to see if a customer got "more than $17M"
| and assume that they're a whistleblower and... do something
| with that.
| jaywalk wrote:
| Even if the SEC structured these payments, I highly doubt
| they'd be under $10k each. It would take way too long.
| roywiggins wrote:
| > Whistleblower awards can range from 10 percent to 30 percent
| of the money collected when the monetary sanctions exceed $1
| million.
|
| Seems like it would be in the range of $56m-$170m, then.
| guga42k wrote:
| could be this case. the amount looks right
| https://www.sec.gov/news/press-release/2021-262
| nathanm412 wrote:
| Or this one https://www.sec.gov/news/press-release/2022-114
| olliej wrote:
| What are the tax implications on rewards like this? I recall
| there being different tax rates for lotteries vs normal
| wage+salary incomes
| loeg wrote:
| Looks like maybe 1099-MISC (ordinary income):
| https://www.irs.gov/irm/part25/irm_25-002-002
| chollida1 wrote:
| > The SEC has awarded approximately $1.3 billion to 278
| individuals since issuing its first award in 2012.
|
| That's either alot of corruption that's been caught due to
| whistleblower rewards or an indication of the amount of
| corruption in the US if you are more cynical.
|
| Whsitleblower's are eligible for 10 to 30% of the money collected
| from fines, so the SEC is also making alot of money from this as
| well.
|
| Here's the list they maintain if you want to look:
|
| https://www.sec.gov/whistleblower/pressreleases
| babypuncher wrote:
| Maybe the IRS should adopt a similar program
| kenny11 wrote:
| They do:
|
| https://www.irs.gov/compliance/whistleblower-office
| elil17 wrote:
| Some version of this exists across the entire US government -
| it's called a qui tam. However, qui tams are more limited to
| cases where the government has been defrauded (as opposed to
| Dodd Frank which covers financial violations that don't
| directly effect the US government).
|
| For corruption within the government, you can report it to an
| inspector general (there is a different inspector general for
| each government agency), although there is not typically a
| financial reward associated with such a report.
| cm2187 wrote:
| I don't know how the 1.3bn breaks down but please keep in mind
| the trend after the financial crisis is to issue fines that are
| disproportional with the size of the offense, as a punitive
| way. So it's not clear the 1.3bn has anything to do with the
| size of the underlying frauds.
| gumby wrote:
| > That's either alot of corruption that's been caught due to
| whistleblower rewards or an indication of the amount of
| corruption in the US if you are more cynical.
|
| Given a stock market of around $100T (and the SEC covers more
| than stocks) it would argue for a rather small amount of
| corruption, were it the only signal.
|
| In fact I believe the corruption at this level is quite small.
| Really, why bother when you can do it wholesale (e.g. telecoms
| simply capturing the regulators)?
|
| > Whsitleblower's are eligible for 10 to 30% of the money
| collected from fines, so the SEC is also making alot of money
| from this as well.
|
| These fines go to the treasury; it's not like they fund
| operations from it.
|
| BTW civil forfeiture, if you even believe in it at all, should
| go to the state or federal general funds. The current system is
| simply legalized theft.
| lotsofpulp wrote:
| > In fact I believe the corruption at this level is quite
| small. Really, why bother when you can do it wholesale (e.g.
| telecoms simply capturing the regulators)
|
| That is still corruption. Sufficiently provable and easy to
| convict corruption might be small. Quid pro quo corruption
| where nothing is in writing is huge.
| elil17 wrote:
| There is a very interesting podcast episode on
| "Freakonomics" where they interview a researcher who posits
| that there are forms of corruption that speed economic
| growth at the cost of fairness and other forms which do not
| speed economic growth.
| https://freakonomics.com/podcast/season-11-episode-12/
| soledades wrote:
| 2OEH8eoCRo0 wrote:
| The US is huge. 278 whistleblowers from 2012 to present is not
| bad at all.
| srveale wrote:
| 278 represents the subset of crimes which
|
| 1. Had the whistle blown
|
| 2. Were investigated
|
| 3. Had enough evidence found during the investigation
|
| 4. Were fined successfully
|
| 5. Were announced via the SEC whistleblower program
|
| Nobody knows the dropoff at every stage but it's certainly
| non-zero and so we can't judge the level of crime based on
| the number we know coming out at stage 5.
|
| I don't think it's overly cynical to assume that 278 is a
| small percentage of the actual count of financial crimes in
| the US since 2012.
| OJFord wrote:
| How do you know in which direction it's not bad? As in, zero
| is obviously (probably) bad; a million is obviously
| (differently) bad.
| ww520 wrote:
| That's a minuscule amount spread in 10 years for the huge
| markets SEC supervising over. SEC probably should have done
| more to encourage more whistleblowers coming forward.
| [deleted]
| anewpersonality wrote:
| olalonde wrote:
| Not sure how to feel about that, this is a _lot_ of money... The
| cobra effect comes to mind[0]. Not to mention that this is all
| done behind closed doors.
|
| [0]
| https://en.wikipedia.org/wiki/Perverse_incentive#The_origina...
| blitzar wrote:
| Given most members of the public assume that everyone in the
| financial sector is party to billion if not trillion dollar
| frauds, it is important to realise that if you blow the whistle
| - you get a chunky cut of the settlement.
|
| So either the system is not quite as riddled with fraud as most
| believe or many people making 500k a year are passing up
| >$100mil to _hide_ the fraud.
| WaxProlix wrote:
| Are people going to start creating fraud just to expose
| themselves and get 10-30% of the take?
| stefan_ wrote:
| No, the frauds are regularly fined less money than they made
| and they never seem to pursue criminal charges either.
| joshcryer wrote:
| So we can't put a corporation in prison even though it's a
| person, and it's a notoriously difficult process to get
| CEOs and upper management indicted, so we fine them because
| it just gets things over with. What if we took
| "corporations are people" a bit further though. What if we
| "imprisoned" the corporation by not permitting it to do
| whatever line of work it was doing during the fraudulent
| phase for a period of years?
| [deleted]
| nullspace wrote:
| My understanding is that doing the things that gets you
| rewarded for whistle-blowing is flat out illegal. You will get
| into a world of trouble if you go for the cobra effect. In that
| way, there's both a carrot and a stick right?
| olalonde wrote:
| What I had in mind was something more innocent like: mid-
| level employee engages in illegal activity (e.g.
| misrepresents some critical data in a report, engages in
| anticompetitive behavior, etc.), blows the whistle on company
| and puts blame on management. Whistleblower is granted
| immunity, company is fined large amount and employee collects
| a large payout.
|
| I'm not saying this actually happened but it seems that large
| rewards may create such incentives. I might also be way off
| here, but it's really hard to know given the lack of
| information surrounding the rewards.
| xenadu02 wrote:
| You cannot receive an award for activities for which you
| have decision-making authority.
|
| "Whistleblower" in a legal sense has to mean that someone
| _above_ you asked you do to the illegal activity.
| olalonde wrote:
| That's what I meant by "blaming management", e.g.
| claiming you were just following orders from above.
| xenadu02 wrote:
| OK sure: If you are sophisticated enough to completely
| fool the SEC investigators without leaving a paper trail,
| email, or text message anywhere that points back to you.
| If you are amoral enough to steal money this way. And
| smart enough to pull it off while dumb enough to do
| something so risky. Then yes in theory you might be able
| to do what you propose.
|
| Perhaps you highlight a good point though: make sure to
| CYA if someone is pressuring you to do something
| borderline. Make sure there is an email or text message
| trail where you highlight your concern about the legality
| of the operation, ask if we should consult a lawyer, etc.
| If someone above you only speaks in person and insists
| that you are the originator of all documents/proposals
| that may be a sign they're trying to make it look like it
| was your idea.
| bluGill wrote:
| Even then, go to the SEC right away. They will provide
| legal advice. Sometimes you should quit, sometimes gather
| evidence.
| manquer wrote:
| Your boss/company is responsible for your actions , if
| they have not put enough controls that is their problem.
|
| For example there is personal phone/messaging app use in
| finance industry resulting in fines that is doing the
| news rounds now.
|
| if you are communicating finance industry information
| outside the work devices provided and your company is not
| put enough controls and disciplined staff etc , they are
| liable for it .
| vkou wrote:
| You can try, just like how you can try to steal your own
| car for the insurance money, but you'll be in a lot of
| shit when it doesn't work out.
|
| Without a paper trail, without coworkers collaborating
| your story, the investigations might not have the outcome
| you desire. Also, if the firm is well run, internal
| audits can catch you, and then you'll be in a lot of
| trouble.
| bluGill wrote:
| You can only do this if when you first realize you are
| being asked to do something illegal you turn them in. You
| are often then askes to collect evidence for a few
| months. Anything elses risks them deciding you knew and
| wanted to benefit from crime and so getting charged,
| particularly if there is another whistle blower who gets
| there before you.
| arnaudsm wrote:
| The obvious solution is to award a percentage of the fine. They
| give between 10 and 30% of the money collected [1]
|
| [1] https://www.sec.gov/news/press-release/2022-40
| codemac wrote:
| That's what they do: https://www.sec.gov/spotlight/dodd-
| frank/whistleblower.shtml
| bityard wrote:
| I can't tell if you're joking or if you actually believe
| someone might go out of their way to set up a successful but
| shady business, just so they can blow the whistle (on
| themselves?) in order to collect the whistle-blowing reward?
| olalonde wrote:
| See my reply here:
| https://news.ycombinator.com/item?id=32157456
| donclark wrote:
| How do we know this was actually issued?
|
| How do know this is new information? What is it related to?
| olliej wrote:
| Because not all of us are conspiracists?
| chabons wrote:
| > As set forth in the Dodd-Frank Act, the SEC protects the
| confidentiality of whistleblowers and does not disclose any
| information that could reveal a whistleblower's identity.
|
| This would seem to preclude any way of independently verifying
| their claims.
|
| Realistically, to prove that there existed a whistleblower and
| this is not just marketing by the SEC, you would need
| incredible amounts of evidence, and even then you'd have no way
| of knowing whether the evidence is fabricated. At some level I
| think you end up just having to trust that the SEC isn't lying
| about paying whistleblowers.
| nathanvanfleet wrote:
| These days even if they said who the whistleblower was people
| might suppose they were a "crisis actor."
| thrwwy32 wrote:
| They only do these press releases when they issue rewards. They
| don't include details to protect the whistleblower's identity.
| 0898 wrote:
| There's a good Darknet Diaries episode about a social engineer
| who makes money from these SEC bounties:
| https://darknetdiaries.com/episode/80/
| muaddirac wrote:
| I know it's protected information, but I am curious which types
| of fraud these amounts are awarded for. There seems to be lot of
| unpunished public examples of securities fraud (MLMs,
| cryptocurrencies, legislators dumping or buying stocks at
| convenient times, etc).
| wmf wrote:
| Just look at the headlines
| https://www.sec.gov/news/pressreleases These are just from the
| past three months:
|
| Equitable Financial To Pay $50 Million Penalty To Settle SEC
| Charges...
|
| UBS to Pay $25 Million to Settle SEC Fraud Charges...
|
| Ernst & Young to Pay $100 Million Penalty for Employees
| Cheating on CPA Ethics Exams...
|
| SEC Halts Alleged Ongoing $39 Million Fraud...
|
| Medley Management and Former Co-CEOs to Pay $10 Million
| Penalty...
|
| SEC Obtains TRO and Asset Freeze against Alleged Perpetrators
| of nearly $450 Million Ponzi Scheme
| seaourfreed wrote:
| I just whistle blew on Tether. Tether is likely to crash. I can't
| wait to get rich from the SEC award
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