Whistleblowers earn millions by providing inside knowledge about people defrauding the government.Editor's note: This story was originally published on March 29, 2021 and later updated to include news about the SEC's whistleblower programs.
Massive whistleblower payments are rare, but tipsters are responsible for bringing some of the most infamous financial fraud in recent years to light. Despite the cost, experts don't see the programs going away anytime soon.A whistleblower is someone who shares credible information about financial fraud, criminal activity, unsafe working conditions, or other improper conduct with a government agency.
Whistleblower tips have uncovered some of the most notable cases of financial fraud in recent years. UBS in 2009 paid a massive $780 billion settlement for helping wealthy American customers evade taxes, and Merrill Lynch in 2018 paid a $415 billion settlement for misusing billions of dollars of customer funds. The whistleblowers who tipped off authorities in those cases made $104 million and $83 million, respectively.
While various laws protect whistleblowers from retaliation, sharing a confidential tip is still a"very risky proposition" for employees who want to stay employed because there's no truly-safe roadmap, according to Wharton School professor Janice Bellace. Thomas estimates that less than 1% of SEC whistleblower cases are eventually successful, meaning the tipster gets paid.
Since many of the CFTC's settlements are much smaller — around $5 million or less, the Journal reported — a blockbuster payout can drain the agency's whistleblower payment pool much faster than it can be replenished. In addition to New York, 20 other states will work with whistleblowers to combat multiple types of fraud under the False Claims Act, and another eight states will use the law for healthcare fraud cases.