SEC Rewards Three Whistleblowers Who Helped Stop Sham Hedge Fund
The Securities and Exchange Commission today announced that three whistleblowers have been awarded more than $25,000 combined for tips and information they provided to help the SEC and Justice Department stop a sham hedge fund.
This is the first installment of anticipated payments to the whistleblowers as additional assets are collected from the purported hedge fund manager. The whistleblowers are expected to ultimately receive approximately $125,000 in total.
The SEC issued an order earlier this summer rewarding each of the three whistleblowers with 5 percent of the money that the SEC ultimately collects from its enforcement action against Locust Offshore Management and its CEO Andrey C. Hicks. In cases where there are related criminal proceedings in which money is collected by another regulator, a provision in the whistleblower rules allows whistleblowers to then additionally apply for an award based off the other regulator’s collections in what qualifies as a “related action.” The Commission subsequently approved 5 percent payouts to each whistleblower for money collected in the related criminal action.
Hicks pled guilty on Dec. 12, 2012, to five counts of wire fraud and consented to the forfeiture of his interest in property previously seized by the Justice Department. He was sentenced to 40 months in prison. Approximately $170,000 has been administratively forfeited in the criminal proceeding – money that is deemed collected for purposes of issuing whistleblower awards. Therefore, the three whistleblowers will now receive $8,505 each. Additional payments can be made to these whistleblowers upon forfeiture of the additional assets that have been seized.
The aggregate value of assets seized from Hicks is estimated to be approximately $845,000, and the whistleblowers are expected to ultimately receive 15 percent of this amount for a combined total of approximately $125,000.
The SEC’s order does not identify the whistleblowers, whose confidentiality is protected under the SEC’s whistleblower program. The order states that two of the whistleblowers provided information that prompted the SEC to open an investigation and stop the scheme before more investors were harmed. The third whistleblower identified key witnesses and confirmed information the other two whistleblowers provided.
The SEC’s whistleblower program is authorized under the law to reward individuals who offer high-quality, original information that leads to an SEC enforcement action in which more than $1 million in sanctions is ordered.
More information about the whistleblower program and how to report a tip is available at: http://www.sec.gov/whistleblower