The Securities and Exchange Commission (SEC) of the United States has granted its most significant whistleblower award to date, amounting to $279 million. Typically, the prize is a monetary incentive created by the regulator to reward deserving individuals who help to expose illicit financial dealings.
The Whistleblower Program
To qualify for a whistleblower award from the SEC, the individual must provide original information that leads to successful enforcement action. This information must be provided voluntarily and based on the whistleblower’s independent knowledge or analysis.
The SEC awards whistleblowers between 10% to 30% of the total monetary penalties collected, provided that the amount exceeds $1 million. According to a recent statement by the SEC, the latest whistleblower award of $279 million is the largest in the commission’s history, surpassing the previous record of $114 million set in October 2020.
The identity of the recipient of the award has not been disclosed. In addition, the $279 million awarded in the latest event surpasses the whistleblower awards issued for last year, with the regulator reportedly dishing out $229 million in 103 awards in 2022.
In a statement on May 5, Gurbir Grewal, the SEC’s director of enforcement, noted that the record-breaking $279 million whistleblower award is a testament to the success of the commission’s whistleblower program. Grewal added that it is a strong incentive for individuals to provide accurate information on securities law violations.
Funding The Whistleblower Award
The US Congress created an investor protection fund to finance these awards, which are not paid from funds owed to harmed investors. Instead, the fund is sustained through monetary sanctions collected by the SEC from those who violate securities laws.
To protect the anonymity and safety of the whistleblower, the SEC typically does not disclose the specific case that the whistleblower award relates to or the whistleblower’s identity. Hence, it is currently unknown whether this record-breaking whistleblower award from the SEC is about a securities violation from the cryptocurrency sector or traditional Wall Street.
Meanwhile, the SEC acknowledged that the whistleblower played a crucial role in a case under investigation, providing valuable information that helped the agency take enforcement action. According to Creola Kelly, who chairs the whistleblowing section at the SEC office, the unnamed whistleblower’s multiple interviews and written submissions were instrumental in the agency’s successful actions.
The Dodd-Frank Wall Street Reform and Consumer Protection Act established the SEC’s whistleblower incentive program. It was signed into law by former US President Barrack Obama in 2010.
The same legislation also created a similar program for the Commodities Futures Trading Commission (CFTC). Since January 2023, the securities watchdog has focused its enforcement actions on the crypto industry.
Observers noted that many token issuers are considering moving their operations out of the United States, while some have done so already. Gary Gensler, the SEC chairman, is at the heart of the commission’s sustained crackdown on the crypto space.
Gensler has repeatedly reiterated that most crypto tokens are securities. Hence, they must be subject to securities laws.
So far, the commission has fined several top crypto exchanges like Bittrex and Paxos for breach of securities rules, with Coinbase already issued a Wells notice. Meanwhile, industry observers believe that the regulator’s aggressive approach would shut the doors on digital assets development in America.