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https://www.wsj.com/articles/
whistleblower-thought-he-would-get-a-big-payout-instead-he-got-nothing-and-went-broke-11624791602

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The SEC called John McPherson's efforts 'extraordinary and
continuing' in helping it shut down an alleged $1.4 billion
investment scam.
U.S.

Whistleblower Thought He Would Get a Big Payout. Instead He Got
Nothing and Went Broke

Securities and Exchange Commission says it can't reward watchdogs if
recouped funds come through bankruptcy process

The SEC called John McPherson's efforts 'extraordinary and
continuing' in helping it shut down an alleged $1.4 billion
investment scam.
By
Mark Maremont
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Mark Maremont

  * Biography
  * @MarkMaremont
  * Mark.Maremont@wsj.com

| Photographs by Rosem Morton for The Wall Street Journal
June 27, 2021 7:00 am ET

John McPherson was almost certain he'd get rich from the Securities
and Exchange Commission's whistleblower program. Instead, he ended up
bankrupt and embittered.

Despite what the SEC called his "extraordinary and continuing"
assistance in helping the agency shut down an alleged $1.4 billion
investment scam, Mr. McPherson was notified last year that his
whistleblower award would likely be close to zero.

The reason? The target company, Life Partners Holdings Inc., had
declared bankruptcy, and the SEC never collected financial penalties
it was owed. Investors, however, were able to recoup more than $1
billion through the bankruptcy process.

Mr. McPherson's experience illustrates a little-known facet of the
SEC's whistleblower program: The regulator won't pay awards for
financial recoveries in bankruptcy proceedings, even if the affected
company entered bankruptcy as a result of the agency's enforcement
actions.

Some critics say that discourages people from reporting the most
egregious frauds--Ponzi schemes and companies with major accounting
chicanery--which often collapse or end up in bankruptcy court.

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