Billion-Dollar Retirement Scam: Who Ya Gonna Call? SEC, CFTC?

Retirement

Photographer: Zach Gibson/Bloomberg© 2018 Bloomberg Finance LP

Billions being skimmed from 401k retirement investors. A knowledgeable insider with compelling evidence ready to blow the whistle on a market leader. Ongoing systemic fraud that needs to be addressed immediately to protect the retirement security of millions of Americans.

That’s the whistleblower case I’ve been working on over the past month. The problem is—and it’s a big problem—the SEC Office of the Whistleblower is currently closed.

According to the SEC’s website:

Due to a lapse in appropriations, the U.S. Securities and Exchange Commission is currently closed. During the closure, time sensitive or critical tips, complaints, or referrals should be submitted via the electronic portal only. Tips, complaints, and referrals submitted via mail and fax will be reviewed when the office reopens. Thank you.

Now, I’m not exactly sure what the words above mean. Are time sensitive or critical whistleblower complaints submitted electronically actually being acted upon by experienced staff?

According to Statement Regarding SEC Operations During A Lapse in Appropriations:

The Division of Enforcement continues to monitor for submissions to the Tips, Complaints, and Referrals (TCR) system that appear to allege conduct that may pose a risk of imminent harm to investors or our markets.

Staff is available to handle emergency enforcement matters, including temporary restraining orders and/or imminent deadline concerns, or investigations of ongoing fraud or misconduct that poses a threat of imminent harm to investors.

As a former SEC attorney with more than a little experience in whistleblower matters, I suspect I will soon learn, in connection with filing a whistleblower complaint on the above mentioned billion-dollar retirement scam, whether or not the SEC is truly monitoring tips that pose imminent harm to investors. But the larger point is, for the moment—until the so-called partial government shutdown ends—whistleblowers cannot be certain their complaints are being fully, professionally acted upon by the SEC.

That’s perilous for whistleblowers, investors and the nation.

According to the SEC:

Assistance and information from a whistleblower who knows of possible securities law violations can be among the most powerful weapons in the law enforcement arsenal of the Securities and Exchange Commission. Through their knowledge of the circumstances and individuals involved, whistleblowers can help the Commission identify possible fraud and other violations much earlier than might otherwise have been possible. That allows the Commission to minimize the harm to investors, better preserve the integrity of the United States’ capital markets, and more swiftly hold accountable those responsible for unlawful conduct.

If you believe the SEC’s above statement, then conversely, when the Office of the Whistleblower is closed or not operating at peak efficiency, the SEC is lacking one of its “most powerful weapons in the law enforcement arsenal.”

Again, that’s dangerous. It’s also utterly unnecessary.

Let us not forget that the SEC’s whistleblower program more than pays for itself. In addition to maximizing protection of investors, the whistleblower program actually makes the federal government lots of money:

Since the program’s inception, the SEC has ordered wrongdoers in enforcement matters brought with information from meritorious whistleblowers to pay over $1.7 billion in total monetary sanctions, including more than $901 million in disgorgement of ill-gotten gains and interest, of which approximately $452 million has been, or is scheduled to be, returned to harmed investors.

The Commission has awarded over $326 million to 59 individuals since the beginning of the whistleblower program.

Paying whistleblowers $326 million to collect over $1.7 billion from investment scammers is a deal our federal government should be doing all day long.

On a happier note, Chris Ehrman, head of the Office of the Whistleblower at the CFTC, tells me his office is fully operational and responsive to any complaints filed electronically and is also returning telephone calls.

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