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SEC Whistleblower Lawyer Blog

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The US Department of Justice is planning to launch its own whistleblower program using the same model as the Securities and Exchange Commission (SEC) and Commodities Futures Trading Commission (CFTC). They will offer financial incentives to individuals who report wrongdoing and are ineligible for other rewards.

Deputy Attorney General Lisa Monaco announced the pilot program at an American Bar Association conference on white collar crime on March 7, 2024. The DOJ will develop the program over the next 90 days and launch the program later in the year. The Department will study the SEC’s and other federal whistleblower programs to develop its own.

“Going back to the days of ‘Wanted’ posters across the Old West, law enforcement has long offered rewards to coax tipsters out of the woodwork,” Monaco said. “Now’s the time to expand our use of this tool in corporate misconduct cases and apply it to reward whistleblowing.”The US Department of Justice is planning to launch its own whistleblower program using the same model as the Securities and Exchange Commission (SEC) and Commodities Futures Trading Commission (CFTC). They will offer financial incentives to individuals who report wrongdoing and are ineligible for other rewards. Continue reading

In the SEC’s latest press releaseIn the SEC’s latest press release, seven individuals have received bounties after supplying credible information and continued assistance that led to a successful enforcement action. The same information and assistance led to another successful related action by a different federal agency. The bounty of $104 million is the fourth largest award in the history of the SEC’s Whistleblower program.

Three single claimants and two sets of joint claimants submitted timely information and offered considerable assistance to SEC staff that allowed them to pursue actions against the company for documented misconduct. The same information was used by another agency and led to two more related actions that included awards., seven individuals have received bounties after supplying credible information and continued assistance that led to a successful enforcement action. The same information and assistance led to another successful related action by a different federal agency. The bounty of $104 million is the fourth largest award in the history of the SEC’s Whistleblower program. Continue reading

Although we most frequently blog about the SEC and its whistleblower program, other federal agencies also have their own. One of those agencies is the US Commodity Futures Trading Commission (CFTC), which oversees all types of futures markets. This independent agency governs derivative markets, which includes futures, swaps, and some types of options.  Begun as a trading exchange for agricultural commodities, the CFTC now oversees a wide variety of commodities, including digital, such as cryptocurrency and foreign exchange markets (FOREX) that deal in foreign currency exchange.  There are legitimate ways for experienced investors to delve into digital assets like these. But many are led to believe that they are investing in something digital when they are actually being defrauded. Increasingly, it’s one by one of the oldest methods in the book: fraudulent dating and romance.Although we most frequently blog about the SEC and its whistleblower program, other federal agencies also have their own. One of those agencies is the US Commodity Futures Trading Commission (CFTC), which oversees all types of futures markets. This independent agency governs derivative markets, which includes futures, swaps, and some types of options.

Begun as a trading exchange for agricultural commodities, the CFTC now oversees a wide variety of commodities, including digital, such as cryptocurrency and foreign exchange markets (FOREX) that deal in foreign currency exchange.

There are legitimate ways for experienced investors to delve into digital assets like these. But many are led to believe that they are investing in something digital when they are actually being defrauded. Increasingly, it’s one by one of the oldest methods in the book: fraudulent dating and romance.

In this blog, we often discuss the financial bounties that whistleblowers receive from the US Securities & Exchange Commission (SEC) and occasionally, the Commodities Futures Trading Commission (CFTC.) What isn’t always discussed is the time and effort that it takes for a whistleblower to get to that point. Recently the SEC issued a press release for National Whistleblower Appreciation Day (on July 30th), commending those who seek to bring fraudulent people and companies to justice. Whistleblowers who report information to the SEC generally involve securities law violations. (OSHA, the Occupational Safety & Health Administration, also has its own whistleblower program for safety and environmental breaches in the workplace.) Becoming a whistleblower can encompass personal risk. The financial bounties are more than just an incentive. Offering monetary awards can also help individual whistleblowers through financial difficulties because of their assistance to the SEC.In this blog, we often discuss the financial bounties that whistleblowers receive from the US Securities & Exchange Commission (SEC) and occasionally, the Commodities Futures Trading Commission (CFTC.) What isn’t always discussed is the time and effort that it takes for a whistleblower to get to that point. Continue reading

In a recent press release, the US Securities & Exchange Commission (SEC) announced the award of more than $6M in bounties in two separate orders. Both orders involve providing information to the SEC for two covered actions.  In the first order, the whistleblower was described as an “outside professional” who was the target of a product solicitation. Believing the product to be misrepresented, the individual contacted SEC staff to notify them of the activity. SEC staff opened an investigation, and the individual offered original information and continual assistance that led to a successful enforcement action. The Claims Review Staff (CRS) awarded this whistleblower “more than $3 million.”  In the second order, CRS awarded “over $3 million” after the individual voluntarily provided original information that produced another successful enforcement action. The whistleblower in this order was an insider who first filed an internal report, and then submitted detailed information to the SEC. The SEC subsequently initiated an investigation into the allegations. This whistleblower met with staff, offered additional information, and identified relevant and important witnesses and documents throughout the investigation.In a recent press release, the US Securities & Exchange Commission (SEC) announced the award of more than $6M in bounties in two separate orders. Both orders involve providing information to the SEC for two covered actions.

In the first order, the whistleblower was described as an “outside professional” who was the target of a product solicitation. Believing the product to be misrepresented, the individual contacted SEC staff to notify them of the activity. SEC staff opened an investigation, and the individual offered original information and continual assistance that led to a successful enforcement action. The Claims Review Staff (CRS) awarded this whistleblower “more than $3 million.” Continue reading

Corporate regulations are nothing new. After the stock market crashed in 1929, plunging the U.S. into the Great Depression, federal regulation of corporate disclosures began. With the passage of the Securities Act of 1933 and the Securities Exchange Act of 1934, Congress attempted to make public companies more transparent about their financial transactions. Now, companies must make a wide range of financial disclosures to protect potential investors. Federal regulations require that publicly held companies disclose all relevant financial information that may influence an investor's decision, which encompasses a broad swath of information. If a publicly held company fails to make required filings or disclosures or makes misleading or false statements in these filings, it may violate corporate disclosure rules. The most common violations of these disclosure rules are related to a company's earnings or income. If a company intentionally includes false or inflated information on its financial statements, it may be guilty of financial fraud.Corporate regulations are nothing new. After the stock market crashed in 1929, plunging the U.S. into the Great Depression, federal regulation of corporate disclosures began. With the passage of the Securities Act of 1933 and the Securities Exchange Act of 1934, Congress attempted to make public companies more transparent about their financial transactions. Now, companies must make a wide range of financial disclosures to protect potential investors. Continue reading

As Special Purpose Acquisition Companies (SPACs) have become increasingly popular were being featured in the news, in recent months, there have been high-profile cases of fraud that have been equally noteworthy. And looking at a few of these is useful for those becoming SPAC whistleblowers—to understand the legal issues some SPACs are facing….  In the Matter of Nikola Corp: In Nikola, the Securities and Exchange Commission (SEC) alleged that Nikola, an electric trucking company, had falsified reports that it had successfully achieved technological milestones to increase share prices in its SPAC. It also misled investors about its production capability, truck orders, and financial outlook. Nikola agreed to settle the case by paying $125 million in fines.    SEC v Akazoo: In this 2021 case, the SEC charged that defendant company Akazoo raised more than $50 million in a SPAC, claiming it was going to merge with a music streaming service that had millions of subscribers and income. However, it had no paying users and little revenue beyond the amount it had raised from investors. A hedge fund published a report concluding that Akazoo was a complete scam—with an SEC investigation confirmed. SEC and Akazoo reached a settlement, where it disgorged $38.8 million to settle the investors' claims.As Special Purpose Acquisition Companies (SPACs) have become increasingly popular were being featured in the news, in recent months, there have been high-profile cases of fraud that have been equally noteworthy. And looking at a few of these is useful for those becoming SPAC whistleblowers—to understand the legal issues some SPACs are facing…. Continue reading

Some investors are increasingly opting to put their money in Special Purpose Acquisition Companies (SPACs) rather than Initial Public Offerings (IPOs). But some of the very same reasons why SPACs are comparatively more attractive may also be reasons why SPAC investors are more vulnerable to losses—and even outright fraud. Let's explore a few of these differences to see why that's the case.  Less Regulation  SPACs are faster and cheaper to execute than IPOs because they are less regulated than IPOs. But that also means that SPAC sponsors have fewer requirements to disclose conflicts of interest. They aren't required to warn investors about the risks of their investment, such as those that come from dilution—when other investors come into to reduce the value of their stake  Faster Timelines  IPOs can take 12-18 months. By contrast, SPACs may take only 4-6 months from creation to its acquisition of a target company. The shorter timeframe means independent analysts have less time to evaluate a SPAC's claims. Unscrupulous SPAC sponsors can take advantage of that by distributing exaggerated forward-looking statements and hiding other issues of concern.Some investors are increasingly opting to put their money in Special Purpose Acquisition Companies (SPACs) rather than Initial Public Offerings (IPOs). But some of the very same reasons why SPACs are comparatively more attractive may also be reasons why SPAC investors are more vulnerable to losses—and even outright fraud. Let’s explore a few of these differences to see why that’s the case. Continue reading

While Special Purpose Acquisition Companies (SPACs) SPACs—shell companies created for the sole purpose of funding the future acquisition of another company—have existed since the 1990s, interest (and investing) in them took off during the pandemic. But the rise of SPAC popularity means that hedge funds and others have been entering the SPAC market, while a number of SPACs are under investigation. That has led the Securities and Exchange Commission (SEC) to propose new rules relating to SPACs.  The proposed rules set out requirements that SPACs would need to comply with to avoid registering as an investment company covered by the Investment Company Act. For example, a non-registered SPAC could only have cash and specified securities as assets. Also, once the SPAC had acquired a target company, the SPAC would need to switch to operating the target's business rather than continue as an investment entity.    Many of the proposed rules relate to disclosure requirements. If adopted, the SPACs will need to provide more information relating to SPAC sponsors, conflicts of interest, and dilution. They'd also need to provide disclosures relating to "de-SPAC transactions," i.e., the SPAC merger with an acquired company and these transactions' fairness to their investors. Most SPACs would also no longer be protected from liability when making forward-looking statements, such as projections, in filings.While Special Purpose Acquisition Companies (SPACs) SPACs—shell companies created for the sole purpose of funding the future acquisition of another company—have existed since the 1990s, interest (and investing) in them took off during the pandemic. But the rise of SPAC popularity means that hedge funds and others have been entering the SPAC market, while a number of SPACs are under investigation. That has led the Securities and Exchange Commission (SEC) to propose new rules relating to SPACs. Continue reading

Leaders of the Securities and Exchange Commission (SEC) recently released its 2022 priorities for its Department of Examinations (EXAMS)—the office charged with monitoring risks and protecting investors. The SEC has made a point of saying the list is just a guideline. EXAMS will still pursue other investigations not on the list. But for those who are considering becoming a whistleblower, it can help strategize your reporting.  EXAMS' priorities include:  Private fund management— including calculation of fees, risk management, and portfolio strategies, with an emphasis on private funds investing in Special Purpose Acquisition Companies (SPACs) where the fund adviser is also the SPAC sponsor Violations of fiduciary duties—such as broker-dealer and SEC-registered investment advisers (RIAs) failure to protect retail investors, through conflicts of interest, insufficient or inaccurate disclosures, account conversions, and rollovers Crypto and emerging technologies—including failure to meet the standards of conduct when offering, selling, and trading crypto-assets, and RIAs and broker-dealers' use of automated digital investment advice (a.k.a. "robo-advisers") to boost salesLeaders of the Securities and Exchange Commission (SEC) recently released its 2022 priorities for its Department of Examinations (EXAMS)—the office charged with monitoring risks and protecting investors. The SEC has made a point of saying the list is just a guideline. EXAMS will still pursue other investigations not on the list. But for those who are considering becoming a whistleblower, it can help strategize your reporting. Continue reading

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