Financial Fraud Attorney

In 2016, the Securities and Exchange Commission (SEC) announced that it awarded over $100 million to financial fraud whistleblowers, with the largest reward being more than $30 million. In recent years, SEC enforcement actions from whistleblower tips have resulted in more than $953 million in financial remedies against perpetrators of fraud in the finance industry.

The financial whistleblower program was established by Congress to award whistleblowers with specific information about federal securities law violations. Much of the recovered money has been returned to investors, and many whistleblowers have been awarded.

Joe Lyon is a highly-rated financial fraud lawyer representing plaintiffs nationwide in a wide variety of workplace fraud claims and whistleblower settlements.  

Financial Fraud Whistleblowers

1.    Whistleblowers and attorneys submit information and evidence of fraud to government
2.    Government and the SEC investigate the allegations
3.    Cases are filed, and penalties are ordered
4.    Whistleblowers and attorneys file claims
5.    Awards are determined for plaintiffs

Whistleblowers may be eligible for an award when they provide the SEC with useful information that leads to a successful enforcement action.  Whistleblower settlement can range from 10 to 30 percent of the money collected when sanctions exceed $1 million.

Since the whistleblower program began in 2012, the government has received more than 14,000 whistleblower tips from individuals in all 50 states. Ohio residents have added over 200 original tips to authorities.

Of these financial industry tipsters, more than $107 million has been awarded to 33 plaintiffs. Under the law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might reveal their identity.

Financial Fraud Whistleblower Settlement

•    In April, 2017, the Securities and Exchange Commission announced an award of nearly $4 million to a person who tipped the agency with detailed information about serious misconduct and provided additional assistance during the ensuing investigation, including industry-specific knowledge and expertise.
•    In January, 2017, the SEC awarded more than $7 million to three whistleblowers who assisted the SEC prosecute an illegal investment scheme.
•    In February, 2017, the U.S. Securities and Exchange Commission awarded a plaintiff 20 percent of any sanctions paid in connection with a claim brought as a result of the plaintiff’s tip.

Private Placements Fraud

Private placements can be attractive because they offer individual investors higher returns than stocks and bonds, but may carry serious risk. Stock brokers have been known to downplay the risks and overemphasize the benefits of adding private placements to a portfolio. There’s typically less information available and less transparency about the companies, increasing investment risk.

Sales of private placements are lucrative to brokers and brokerage firms, however, and have been a favorite instrument in stock broker and financial advisor fraud claims. Since 2013, firms selling private placements are 1.4 times more likely to have been expelled from the financial industry since than those that didn’t.

Regulators and Financial negligence attorneys are concerned this trend is growing and will lead to more individual investors and senior investors victimized by their brokers. Private placements are usually restricted to sophisticated investors, and are sometimes sold to individual investors are unique opportunities even if they do not fit with an original investment plan.

The commissions alone create a fraudulent stock broker’s motivation to sell the securities, without much thought for the financial well-being of an investor. Financial advisor fraud may include the following:

• Prioritizing fee generation
• Fraudulent markup prices of securities
• Failure to explain the risks of a particular investment
• Failure to perform due diligence of a security sold to an investor
• Selling financial instruments to receive kickbacks or perks
• Entering investors into reckless investments
• Failure to create readable financial reports
• Non-compliance with federal securities laws and regulations

Financial Whistleblower Lawyer

Stock brokers and securities firms feeling pressure to churn a profit are selling tens of billions of dollars a year of private stakes (private placements) in companies, including risky investments that often target seniors.

Individual investors trusting financial experts are victimized by Financial Advisor Fraud, and may pay incredible sums in fees and lose value due to irrational investment risk taken by brokers.

In a Wall Street Journal review of more than a million regulatory records, research identified over a hundred firms where 10 to 60 percent of in-house brokers had three or more investor complaints, regulatory actions, or even criminal charges.

The brokers in question sell very risky private placements or other investment vehicles that may result in the loss of huge parts of a client’s portfolio. Sales of private placements are surging, and the majority of investors are not warned of the risks or told what the investments entail.

Financial Fraud Whistleblowers are encouraged to hire an attorney to best protect them from retaliation, and to maximize the award they may be entitled to. When faced with fraud claims, employers may lash out and terminate any employee who identifies fraud. This is illegal, and whistleblower protection is critical in the process.

Whistleblowers have filed complaints and reached whistleblower settlements regarding the following:

•    Shareholder Class Action
•    Private Placement Fraud
•    Financial Statement Fraud
•    Fraud Against Seniors
•    Insurance Fraud
•    Identity Theft
•    Investment Fraud
•    Letter of Credit Fraud
•    Market Manipulation (“Pump and Dump”) Fraud
•    Non-Delivery of Merchandise
•    Ponzi Schemes
•    Prime Bank Note Fraud
•    Pyramid and Ponzi Schemes
•    Bond Fraud
•    Reverse Mortgage Scams

Understanding the Dodd-Frank Act

The SEC Whistleblower Program was created by Congress under the Dodd-Frank Act. The financial fraud Whistleblower Program offers financial incentives for individuals who report securities violations to the SEC.

In instances where a plaintiff provides information leading to an enforcement action resulting in over $1 million, the person may receive an award in the amount of 10 to 30 percent of the sanction amount. Some factors that may increase the amount include the following:

•    The significance of the evidence provided
•    The assistance provided by the whistleblower
•    The whistleblower’s participation in internal compliance systems

Financial Advisor Fraud

Ponzi schemes and other financial fraud vehicles often target the elderly. Regulators and financial negligence attorneys are taking measures to curb this problem.

Financial whistleblowers can receive huge rewards, and victims may be able to recover lost funds. The SEC says financial advisor fraud is unavoidable, so the goal is identify issues before too many seniors and individual investors are victimized.

The study conducted by the Wall Street Journal identified brokerage firms selling private placements and could be likely targets in in financial advisor fraud lawsuits. The SEC has also expressed concern over the elderly and retirees being taken advantage of to pad the pockets of brokers.

Investors can try to protect themselves and ask the following of their broker: How are they paid, by fees and commission or on salary? What are the incentives of selling certain financial instruments?

Why File a Whistleblower Complaint?

If you have become aware of a case of financial fraud at the workplace, it may behoove you to come forward and file a confidential complaint with the help of a financial fraud lawyer. While it may seem terrifying to blow the whistle and implicate an employer or colleague in an illegal act, it can be lucrative and the ethical decision.

Plaintiffs with information about fraud should consult an experienced attorney when considering the best way to move forward in a case to maximize their potential award. The size of potential reward is one consideration, though an equally important legal consideration is the risk of possible retaliation. An attorney can assist financial fraud whistleblowers in these important matters.