Wall Street’s cops are finding themselves partnered with an unlikely star witness against misbehaving firms: short sellers.
Alongside their public reports, short sellers are quietly sharing their research about sketchy accounting and other misdeeds with the US Securities and Exchange Commission’s whistleblower office in hopes of making some extra money.
“Many of the really good external fraud detectives are short sellers,” Block said in an interview. “If you want the whistleblower program to be open to external whistleblowers, you have to be open to short sellers and can’t discriminate against them.”
Four of every 10 bounties went to people who weren’t insiders, according to SEC data from 2021, which didn’t break out how many were short activists. That’s because unless a tipster publicizes it, whistleblower filings and awards are confidential. The secrecy makes it near impossible to tell how often the SEC rewards short sellers. The bids for bounties by Block and Bass were revealed only when litigation arose over their whistleblower proceedings. The SEC declined to comment for this article.
‘Enforcement 40’ for 2020
Join Us On LinkedIn
Join the Securities Litigation and Enforcement Group on LinkedIn