Financial Fraud Whistleblower Lawsuits

What Is Financial Fraud?

Financial fraud occurs when individuals or corporations misrepresent information for financial gain, often deceiving regulators, investors, taxpayers, or government agencies. Whistleblowers are critical in exposing these schemes, as much of the fraud is hidden from public view.

Common Types of Financial Fraud:

• Securities Fraud – Insider trading, accounting fraud, and manipulation of financial statements to deceive investors or regulators.

• Accounting Fraud – Concealing losses, inflating revenue, or falsifying books to hide financial instability.

• Bank and Mortgage Fraud – Misrepresentation of loan quality, fraudulent foreclosure practices, or improper securitization.

• Government Contract Fraud – Overbilling, inflating costs, or failing to meet contract obligations with federal agencies.

• Healthcare Financial Fraud – Submitting false claims to Medicare and Medicaid or engaging in illegal kickback schemes.

• Tax Fraud – Hiding income, offshore tax evasion, and false reporting to the IRS.

Legal Framework for Financial Fraud Whistleblower Claims

Several federal laws empower whistleblowers to file lawsuits or reports when they uncover financial fraud. These laws also provide financial rewards and protection against retaliation.

The False Claims Act (FCA) and Qui Tam Lawsuits

The False Claims Act allows private individuals to file lawsuits—known as qui tam actions—on behalf of the government when they uncover fraud against federal programs. Successful whistleblowers may be awarded 15–30% of the total recovery.

SEC Whistleblower Program

The Securities and Exchange Commission (SEC) operates one of the most powerful whistleblower programs. Under Dodd-Frank, whistleblowers who provide original information leading to enforcement actions can receive between 10–30% of monetary sanctions collected.

IRS Whistleblower Program

The IRS rewards whistleblowers who report tax fraud and significant underpayments. Awards may reach up to 30% of the recovery, and in large corporate cases, awards can total millions of dollars.

CFTC Whistleblower Program

The Commodity Futures Trading Commission (CFTC) rewards individuals who expose fraud in commodities trading, derivatives, and other financial markets.

Sarbanes-Oxley & Dodd-Frank Protections

Both Sarbanes-Oxley and Dodd-Frank provide legal protections for employees in publicly traded companies who report financial fraud, including the right to sue for retaliation.

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.