A Case Over $14M Whistleblower Award Serves as a Reminder of Benefits and Risks of Co-Whistleblowers Working Together
By the 91pornWhistleblower Team
There is often strength in numbers. Two or more whistleblowers working together can be a potent combination to bring truth to light. Each may bring unique knowledge and information, and together the co-whistleblowers can reveal a broader scope or clearer picture of the fraud and improve the chances of a successful outcome – in other words, the whole can be greater than the sum of its parts. Co-whistleblowers can also share the mental and emotional toll that may come when accusing powerful people or companies of misconduct. And they can agree in advance on how they will share any potential recovery, thus avoiding protracted negotiations or disputes after an award determination.
However, it is important for co-whistleblowers to be on the same page when reporting information under the various whistleblower programs available under the law. If they’re not, it can lead to serious issues that may affect the outcome of a case or submission, the efficiency with which it progresses, and the whistleblowers’ eligibility for awards, to name a few. Indeed, a recent decision in a case over a $14 million whistleblower award under the SEC Whistleblower Program illustrates some potential pitfalls when co-whistleblowers are not fully aligned and provides a valuable reminder to co-whistleblowers and their counsel to maximize the benefits of co-whistleblowers working together while avoiding the downsides. First, a bit of background.
The SEC Whistleblower Program
Under federal law, there are a number of whistleblower rewards programs that encourage and incentivize whistleblowers to come forward and report violations to the appropriate government enforcers. The Securities and Exchange Commission (SEC) Whistleblower Program, for example, encourages individuals with knowledge of violations of U.S. securities laws to report that information to the SEC. Under the SEC Whistleblower Program, eligible whistleblowers can receive an award of between 10 to 30 percent of monetary recoveries in actions brought by the government.
SEC Whistleblower Program Successes
The SEC Whistleblower Program has been a tremendous success. Since its inception in 2011, the SEC has awarded more than $2.2 billion to hundreds of individual whistleblowers — $255 million in fiscal year 2024 alone.[1] Multiple individuals may be eligible to receive a whistleblower award for a successful action.[2] For example, this April the SEC announced a $6 million award to two whistleblowers who caused the SEC to open an investigation that led to a successful enforcement action. In this situation, the SEC treated the claimants jointly as a whistleblower given that they “[i] presented themselves as a team in several submissions to the Commission and in their whistleblower award applications; and [ii] have been represented by the same whistleblower counsel when submitting written submissions of information to the Commission, interacting with Enforcement Staff, and in submitting their whistleblower award applications.”[3]
A Lawsuit Over a $14 Million SEC Whistleblower Award
In Barnes v. Block and Muddy Waters, LLC, two individuals (and an LLC) are embroiled in litigation over a $14 million whistleblower award that the SEC granted back in March 2022.[4] In short, the plaintiff alleges that the parties agreed to share in net revenue from research and reports prepared concerning inflated stock prices,[5] but that the plaintiff was ultimately cut out of an SEC award that went to the defendant,[6] according to a recent judicial decision in the case. The plaintiff sued the defendants, “asserting claims for breach of fiduciary duty, unjust enrichment, and constructive trust.”[7] The defendants also filed a defamation suit against the plaintiff relating to the plaintiff’s “public statements alleging that a partnership existed between them.”[8]
The recent June 23, 2025 judicial decision in the case concerned the defendants’ motion to dismiss for lack of jurisdiction and for failure to state a claim, among other things.[9] The court largely denied the defendants’ motion, holding that the court has personal jurisdiction over the defendants,[10] and that the plaintiff properly pleaded his unjust enrichment and breach of fiduciary duty claims.[11] The court did, however, dismiss the plaintiff’s constructive trust claim as premature, but did so without prejudice to pursue it as a remedy if the defendants’ liability is established.[12]
Benefits and Risks of Co-Whistleblowers Working Together
Apart from the specific holdings described above, the Muddy Waters case provides an important reminder of the benefits and risks of co-whistleblowers working together.
Co-whistleblowers working together can uncover and allege a broader fraudulent scheme and they can combine their unique knowledge and experiences to help their counsel and government enforcers make out a compelling case against a defendant. However, it is crucial that co-whistleblowers are and remain on the same page. When they’re not, it can lead to serious consequences that may affect, among other things, the outcome of a case or submission, the efficiency with which it progresses, and the whistleblowers’ eligibility for awards. It can also lead to subsequent litigation between them. For that reason, it is often a good idea for co-whistleblowers and their counsel to set realistic expectations at the outset about what each whistleblower will bring to the table and, in the event of a successful award or recovery, how those awards or recoveries will be divided. While it may be impossible to predict the future, careful planning at the outset can help avoid surprises and animosity between co-whistleblowers down the road.
Our Firm Helps Whistleblowers
Selecting an experienced whistleblower attorney can help co-whistleblowers coordinate their efforts and file the strongest claim possible. 91pornpartner Dan Vitelli commented: “When multiple individuals or entities bring a claim together, they can often broaden the scope of their case or claim, reinforce each other, and share at least some of the burdens. If the group remains aligned, it can be an effective way to strengthen the case and improve the chances of a successful outcome.”
If you have information on securities fraud, healthcare fraud, procurement fraud, or other types of fraud or misconduct, our firm can help. If you believe you have information about fraud, please contact our team to discuss your options as a potential whistleblower.
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Sources:
[1] SEC Office of the Whistleblower, Annual Report to Congress for Fiscal Year 2024 (Nov. 15, 2024), available at .
[2] See Securities Exchange Act of 1934 Section 21F(a)(6) [15 U.S.C. § 78u-6(a)(6)] (“The term ‘whistleblower’ means any individual who provides, or 2 or more individuals acting jointly who provide, information relating to a violation of the securities laws to the Commission, in a manner established by rule or regulation, by the Commission.”).
[3] SEC Order Determining Whistleblower Award Claim (Apr. 21, 2025), n.1, available at .
[4] See Barnes v. Block and Muddy Waters, LLC, No. 22-cv-7236 (S.D.N.Y.), ECF No. 41 (Mem. Op. & Order dated June 23, 2025), at 2-5.
[5] Id. at 2-3 (describing plaintiff’s allegations that (i) the parties “agreed to work together on a series of research projects concerning inflated stock prices”; (ii) “[t]he parties … agreed, if they sold any reports, to share in the net revenue from such transactions”; (iii) “the parties hashed out the terms of an oral partnership agreement to pursue research on Focus Media and decided that Plaintiff would provide the research and financial analysis and Defendants would publicize the findings”; and (iv) “[t]he parties shook hands on the partnership and expressly used the term ‘partnership’ and have never deviated from that designation”) (internal quotations and citations omitted).
[6] Id. at 4 (describing plaintiff’s allegations that “[the defendant] informed [the plaintiff] that he already had counsel handle [the award application], although [the defendant] had made the submission on his own behalf and failed to include [the plaintiff] in the process” and that “[the plaintiff] then submitted his own application without retaining counsel”); id. at 5 (describing plaintiff’s allegations regarding SEC grant of defendant’s application for award and defendant’s receipt of $14 million payment).
[7] Id. at 1.
[8] Id. at 5.
[9] Id. at 1.
[10] Id. at 8-9 (“The Court is satisfied that the alleged pattern of repeated business meetings, forming pivotal moments in the alleged partnership and relevant events, shows that Defendants purposefully availed themselves of the forum of New York in connection with the business activities from which Plaintiff’s claims arise. … The allegations of the Complaint plausibly allege that Defendants engaged in the requisite ‘minimum contacts’ with New York through their business transactions in this state, which specifically give rise to the claims in this action.”).
[11] Id. at 14, 20.
[12] Id. at 21.
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