Katz, Marshall & Banks partner David J. Marshall was interviewed by Law360 following the announcement by the U.S. Securities and Exchange Commission (“SEC”) that it would begin the disbursement of its second-ever whistleblower award under the new “bounty” provisions of the 2010 Dodd-Frank Act. The SEC announced that it would disburse approximately $25,000 immediately, to be split among three anonymous claimants who provided information to the agency regarding Locust Offshore Management LLC, a fictitious fund that bilked at least 10 investors, and its CEO Andrey C. Hicks, who was criminally charged over the scheme and sentenced to 40 months in prison. The SEC intends to disburse another $100,000 to the whistleblowers after the agency collects and processes what it estimates to be approximately $845,000 in assets it has seized from Hicks.
As Marshall told Law360, the information provided by the whistleblowers was invaluable not because of the amount of money they recouped for the government, but because of the amount of money they prevented from being defrauded from future investors. Marshall explained to Law360 that “They had raised $1.7 million and were well on their way to raising what could have been a very large amount of money that investors would never have seen again. It appears that the SEC whistleblower program helped the SEC nip a sham hedge fund in the bud before it did much greater harm to the market.”
