Showing further signs that the Securities and Exchange Commission's whistleblower program is working, the SEC announced Friday that three whistleblowers have been awarded more than $25,000 combined for tips and information they provided to help the agency and Justice Department stop a sham hedge fund.
The $25,000 is the first installment of anticipated payments to the whistleblowers as additional assets are collected from the purported hedge fund manager, the SEC said. The whistleblowers are expected to ultimately receive a total of approximately $125,000.
The SEC issued an order earlier this summer rewarding each of the three whistleblowers with 5% of the money that the SEC ultimately collects from its enforcement action against Locust Offshore Management and its CEO, Andrey 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 SEC said in a statement. The commission subsequently approved 5% payouts to each whistleblower for money collected in the related criminal action.
Hicks pleaded guilty on Dec. 12, 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.
