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Screenshot of a breaking news alert e-mail from Q2 2017
The Wall Street Journal is reporting that the SEC’s fine $382 million to State Street Corp (NYSE:STT) for applying hidden markups to FX trades in mutual funds, and overcharging other clients in FX trades, will result in record Whitleblower rewards being paid out.
And one of the recipients of the largest-ever whistleblower award is a face and name fairly well-known in the Retail Forex world, Ryan Gagne (pictured at top left), whom LeapRate interviewed last year. Mr. Gagne is now Head of Sales North America for FX Prime Broker Divisa Capital, responsible for NA sales of Divisa’s otcXchange product. Prior to joining Divisa in early 2015 he was VP Institutional Sales at Alpari’s US arm from 2012-2015. Alpari withdrew its NFA membership in the US in early 2015, after selling its Retail operation in the US to FXCM in late 2013.
However it was Ryan Gagne’s previous employment at State Street from 1995-2003 which ended up being the source of his windfall.
According to the WSJ Mr. Gagne and another former State Street FX employee, Peter Cera, stand to share about $90 million (!!) of Whistleblower payments for their cooperation with US authorities which led to the mega fine to State Street. In a similar case, former BNY Mellon employee Grant Wilson may make close to $60 million.
The largest whistleblower award to date is $30 million, paid out by the SEC to an anonymous tipster in September 2014.
The three Whistleblowers were apparently brought together by a man named Harry Markopolos. Markopolos gained fame in the late 2000’s for warning the U.S. government about Bernie Madoff’s Ponzi scheme.
The WSJ reports that Markopolos started looking at the lack of scrutiny in how trust banks were overcharging clients in the foreign exchange markets. To move the cases forward he started searching for bankers who could bring evidence of this kind of behavior to the government. That’s when he came across Gagne, Cera and Wilson. And the rest, as they say, is history.
Mr. Markopolos was also instrumental in getting U.S. regulators to agree to put their high-payout Whistleblower program into place, to heavily incentivize already well-paid employees to speak up and uncover wrongdoing at their employers. The current SEC Whistleblower program is designed to pay out between 10-30% of fines levied, depending on the type, timing and critical-ness of the information provided by the Whistleblower.
The only way to catch many investment frauds and schemes is internally, and the best way to catch the fraudsters is to pay their coworkers / bosses / underlings to tell.