• AML
  • Qui Tam
  • SEC
  • CFTC
  • FCPA
  • FAQS
Demand Protections for Artificial Intelligence Whistleblowers | Take Action!
Subscribe
Donate
Get Help
No Result
View All Result
Whistleblower Network News
The Truth at Any Cost.
Qui Tam, Compliance and Anti-Corruption News.
Whistleblower Network News
No Result
View All Result
Home Corporate SEC

5th Circuit Rules that SEC Whistleblowers are Ineligible for Awards in Certain Bankruptcy Proceedings

Geoff SchwellerbyGeoff Schweller
September 25, 2024
in SEC
Reading Time: 3 mins read
SEC
Share on TwitterShare on FacebookShare on LinkedInEmail

On August 30, the United States Court of Appeals for the Fifth Circuit ruled in Barr v. SEC, that two whistleblowers are not eligible to receive whistleblower awards based on proceeds collected by the government in a voluntary bankruptcy proceeding. 

After two whistleblowers exposed what has been called “one of the biggest frauds in Texas history” the SEC sanctioned the fraud-committing company $38.7 million. The company then voluntarily declared bankruptcy in response to the sanctions.

The two whistleblowers fully qualified for awards under the Securities and Exchange Commission (SEC) Whistleblower Program, but the Court sided with the SEC’s argument that whistleblowers are not eligible for awards based on funds collected from the bankruptcy proceeding.

Register for National Whistleblower Day Register for National Whistleblower Day Register for National Whistleblower Day

Through the SEC Whistleblower Program, qualified whistleblowers are eligible for awards of 10-30% of the funds collected in an action aided by their disclosure. The Fifth Circuit ruled that a voluntary bankruptcy proceeding is not “an action” carried out by the SEC.

Thus, despite their whistleblowing resulting in the SEC sanctioning a company $38.7 million and returning millions to harmed investors, the two whistleblowers have only received $31,000 according to reporting by Bloomberg.

According to whistleblower attorney Andrew Feller of Kohn, Kohn & Colapinto, this ruling reveals a major shortcoming in the SEC Whistleblower Program. In a new article published by the Columbia Law School BlueSky blog, Feller, a former high-ranking SEC official, outlines the implications of the ruling.

“Given that a central goal of the SEC Whistleblower Program is to create and incentive for whistleblowing through the promise of monetary awards, denying whistleblowers a fair award in these circumstances threatens to undermine the effectiveness of the program,” Feller wrote. “A whistleblower with knowledge of a massive fraud whose uncovering could force a company to declare bankruptcy may understandably think twice before taking on the risks of whistleblowing.”

“If the precedent of the Fifth Circuit ruling stands, the SEC should reconsider its position on exercising exemptive authority in circumstances where a distribution to harmed investors in bankruptcy can be clearly identified as a direct result of the SEC’s action and the whistleblower’s tip,” Feller continued. “Moreover, Congress should consider reforms to resolve this tension. Since the passage of the Dodd-Frank Act, whistleblowers and the SEC have proven to be great partners in cracking down on fraud and protecting the investing public. The holding in this case threatens to place an unnecessary strain on this partnership.”

Further Reading:

Fifth Circuit Ruling Underscores a Shortcoming of the SEC Whistleblower Program

More SEC Whistleblower News

Previous Post

Samherji vs. Odee: Art, Accountability, and the Limits of Parody

Next Post

Leading Whistleblower Firm Launches Securities and Commodities Whistleblower Practice Group

Geoff Schweller

Geoff Schweller

Geoff Schweller is the Assistant News Editor for Whistleblower Network News. He coordinates news coverage, and also writes about breaking whistleblower news, SEC whistleblowers, IRS whistleblowers, CFTC whistleblowers, and federal employee whistleblowers. Geoff graduated from Hamilton College with a degree in Sociology and minors in French & Francophone Studies and Cinema & New Media Studies.

Next Post
Kohn, Kohn & Colapinto Launches Securities and Commodities Whistleblower Group With Allison Herren Lee and Andrew Feller

Leading Whistleblower Firm Launches Securities and Commodities Whistleblower Practice Group

Receive Daily Alerts

Subscribe to receive daily breaking news and legislative developments sent to your inbox.

  • This field is for validation purposes and should be left unchanged.

Most Popular

Whistleblower Advocates Take Issue with New York’s Policy of Favoring Arbitration

Whistleblowers to Receive Up to $920K after Alleging Fraud in Breast Cancer Testing

Supreme Court Upholds, For Now, Trump Firing of MSPB Chair

Whistleblower Suit Leads to $3.3 Million Stark Law Settlement

Paper Outlines Founding Father’s Warnings As Trump Goes After Key Whistleblower Appointees

Whistleblower Receives $5 Million for Exposing California Health System’s Alleged Kickback Scheme

Whistleblower Poll

Whistleblower Poll
Whistleblower Poll

Exclusive Marist Poll: Overwhelming Public Support Among Likely Voters For Increased Whistleblower Protections

byGeoff Schweller
October 6, 2020

ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT

STAY INFORMED.
Subscribe to receive breaking whistleblower updates.

  • This field is for validation purposes and should be left unchanged.

About Us

  • About
  • Contact Us
  • Donate
  • Careers

Subscribe

  • Daily Mail
  • Follow us on Twitter
  • YouTube Channel

Contribute

  • Letter to the Editor
  • Submission Guidelines
  • Reprint Guidelines

Your Experience

  • Accessibility Statement
  • Privacy Policy
  • Terms of Use

Help

  • Rules for Whistleblowers
  • Frequently Asked Questions
  • Advertise
Whistleblower Network News

Whistleblower Network News is an independent online newspaper providing our readers with up-to-date information on whistleblowing. Our goal is to be the best source of information on important qui tam, anti-corruption, compliance, and whistleblower law developments.

Submit an Article

Copyright © 2025, Whistleblower Network News. All Rights Reserved.

This Newspaper/Web Site is made available by the publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this website, you understand that there is no attorney-client relationship between you and the Newspaper/Web Site publisher. The Newspaper/Web Site should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

Become a Whistleblower Network News Subscriber

Login to your account below

Forgotten Password? Sign Up

Create New Account!

Fill the forms below to register

All fields are required. Subscribe to WNN

Retrieve your password

Please enter your username or email address to reset your password.

Subscribe to WNN
Join the Waitlist for National Whistleblower Day 2025! July 30, 2025 on Capitol Hill
JOIN WAITLIST

Add New Playlist

Demand Protections for Artificial Intelligence Whistleblowers

Take Action!
No Result
View All Result
  • Exclusives
  • Government
    • False Claims-Qui Tam
    • Federal Employees
    • Intelligence
  • Corporate
    • CFTC & Commodities
    • Dodd-Frank
    • IRS & Tax
    • SEC & Securities
  • Features
  • Legislation
  • International
    • Foreign Corruption
  • Rewards
  • Whistleblower of the Week
  • Environment & Climate
  • Opinion
  • Editorial
  • Employment
    • Sarbanes-Oxley Whistleblowers
    • Retaliation
    • OSHA
  • Make National Whistleblower Day Permanent
  • Media
    • Podcasts
    • Videos
    • Webinars
    • National Whistleblower Day
  • Whistleblower Poll
  • Whistleblower Resources
    • Frequently Asked Questions
    • Resources for Locating An Attorney
    • The New Whistleblowers Handbook

Copyright © 2024, Whistleblower Network News. All Rights Reserved.

Go to mobile version