Tuesday, April 28, 2015
SEC Grants Labaton Sucharow Client Maximum Whistleblower Award in Landmark SEC Enforcement Action
Led by firm partner, Jordan Thomas, team secures a substantial monetary award for client, equal to 30 percent of the sanctions collected by the SEC
NEW YORK (April 28, 2015)—Labaton Sucharow LLP, which established the nation's first practice exclusively dedicated to representing Securities and Exchange Commission (SEC) whistleblowers, is pleased to announce that the SEC has awarded the firm's client the maximum amount allowed under the SEC Whistleblower Program. The program allows eligible whistleblowers to receive between 10 percent and 30 percent of the total monetary sanctions collected in a successful enforcement action.
Labaton Sucharow's whistleblower client provided high-quality information that led to sanctions against Paradigm Capital Management (Paradigm) and Candace King Weir, Paradigm's CEO. They are charged with engaging in prohibited and undisclosed principal transactions, among other violations. In June 2014, Paradigm and Weir agreed to pay more than $2.18 million to settle the SEC's charges.
"We are very pleased, but not surprised, the SEC granted our application for the maximum possible award under the SEC Whistleblower Program, as our client was instrumental in the Commission's detection, investigation and prosecution of Paradigm's wrongdoing," said Jordan Thomas, Chair of Labaton Sucharow's Whistleblower Representation Practice.
According to the SEC's order, Weir caused Paradigm, a New York-based hedge fund advisory firm, to engage in at least 83 principal transactions with an affiliated broker-dealer, C.L. King, when trading on behalf of a hedge fund client. Paradigm was required to disclose these principal trades to its hedge fund clients. Instead, Paradigm sought to fulfill its disclosure and consent obligations using a "conflicts committee," which was itself conflicted and lacked the necessary independence to fulfill these obligations. Accordingly, Paradigm failed to properly disclose trades—which were designed to reduce investors' tax liability—to the hedge fund's clients.
Due to the unique protections and incentives offered by the SEC Whistleblower Program, eligible whistleblowers—including Labaton Sucharow's client in this case—have the ability to report possible federal securities violations anonymously with employment protections and the opportunity to earn substantial monetary awards. To ensure that adequate funds are available to pay awards, Congress has established a replenishing Investor Protection Fund, which has a current balance in excess of $425 million.
Labaton Sucharow would like to acknowledge the Outten & Golden law firm for its counsel in this matter.