SEC Award: $875 Million to be Split Between Two Whistleblowers

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The Securities and Exchange Commission (SEC) announced a whistleblower award of more than $875,000 to be equally split between two whistleblowers who provided tips and assistance to the agency.

The SEC’s whistleblower program was authorized by the Dodd-Frank Act and allows for the providing of financial rewards for what the SEC deems to be high-quality, original information that leads to an enforcement action by the SEC. At least $1 million in sanctions must occur, according to Corporate Crime Reporter, and awards to whistleblowers range from 10 to 30 percent of the total money collected. The SEC must protect whistleblower confidentiality and is prohibited from disclosing information that may directly, or indirectly, reveal the whistleblower’s identity.

“These whistleblowers provided original information and assistance that enabled us to investigate and bring a successful enforcement action in a complex area of the securities market,” said Sean McKessy, chief of the SEC’s Office of the Whistleblower. “Whistleblowers who report their concerns to the SEC perform a great service to investors and help us combat fraud,” McKessy added, according to Corporate Crime Reporter. Since its inception in late 2011, eight whistleblowers have received awards through the program.

In a recent case, the SEC issued a $14 million whistleblower payout in a case involving a huge real estate scam involving allegations made in 2013 that concerned about 250 investors. For the most part, the investors were from China and alleged they were “duped” by Anshoo R. Sethi, 30, and two of his Chicago, Illinois-based companies, wrote the The Wall Street Journal. Allegations also included that Sethi and his two companies tricked investors into paying in excess of $155 million for a supposed plan to build a hotel and a conference center, people familiar with the matter told the Journal.

The SEC indicated that the investors claimed they were under the impression that they were increasing their chances of receiving green cards under the scam. The program allegedly involved qualification for immigration that would provide United States residency tied to investments that created employment, the Journal reported. According to the SEC, Sethi and his firms sold more than $145 million in securities and collected $11 million in administrative fees from these investors. Compliance Week reported that the investors were led to believe that by buying interests in ACCC and that they would be financing construction of the “World’s First Zero Carbon Emission Platinum LEED certified” hotel and conference center to have been built close to Chicago’s O’Hare Airport.

The investors were also under the impression that the so-called investments would improve their chances of receiving U.S. citizenship through the EB-5 Immigrant Investor Pilot Program. Under this program, overseas investors are given a way in which to obtain U.S. residency by investing in domestic projects that create or preserve jobs for U.S. workers, according to Compliance Week.

SEC allegations also included that Sethi and his companies did not possess the mandated building permits and, according to the Journal, claims of being supported by major hotel chains were bogus as was the documentation provided to immigration authorities.

The federal government determined that the whistleblower, who is permitted to maintain his/her anonymity, was due 10 percent of the investors’ recovered money. “We’re confident there will be more frequent and numerous payouts as the program continues to gain momentum,” SEC enforcement chief Andrew Ceresney, told the Journal at the time. The award, which was issued on September 30, 2013, was considered the most significant whistleblower award by the SEC’s Office of the Whistleblower, according to Compliance Week; the $14 million totals some 10 percent of the funds returned to the investors and is on the lower end of the 10-30 percent of the whistleblower award range established under the Dodd-Frank Whistleblower Program.