Finance

The founder of fund manager TFS Capital, said he’s planning to apply for a whistleblower reward after the agency announces its penalty against Credit Suisse.

Credit Suisse may have to pay more than $50 million in fines and disgorgement to the SEC and another $30 million to the New York attorney general over allegations the company misrepresented itself. 

The SEC can award whistleblowers between 10% and 30% of a fine, meaning he could potentially receive a $15 million payday. The dark pool whistleblower said he will submit a claim, provided the SEC suit turns out to be along the lines of the complaints he made.

Dark pools, where supply and demand is kept private and only details of executed trades are made public, make up around one-fifth of trading in the $23 trillion U.S. stock market. Credit Suisse’s Crossfinder platform is the largest alternative trading system in the U.S.

Healthy Markets published a report on September 15, 2015 that concluded, "Dark pools play an important role in our markets. Unfortunately, recent regulatory actions against dark pool operatorshavedemonstratedthatinvestors are justifiedintheir longstanding fears over dark pools’ lack of transparency. Investors and their brokers must revise theirown practices and expectations to better protect themselves from dark pool abuses. By demanding more transparency and lesser conflicts of interest, investors and theirbrokersmayhelpensure dark pools continue to play a constructive role in US capital markets in the years to come."

A settlement has been reached in a whistleblower class action lawsuit brought against Nelnet Inc and Nelnet Educational Loan Funding Inc, Southwest Student Services Corp, Brazos Higher Education Authority and Brazos Higher Education Service Corp, and Panhandle Plains Higher Education Authority and Panhandle Plains Management and Servicing Corp.  They are accused of  improperly inflating interest rate subsidies from the Department of Education.

The settlement details are as follows: Nelnet Inc. and Nelnet Educational Loan Funding Inc. have paid $47 million to the United States. Southwest Student Services Corp. has paid $5 million. Brazos Higher Education Authority and Brazos Higher Education Service Corp. have paid $4 million. Panhandle Plains Higher Education Authority and Panhandle Plains Management and Servicing Corp. have paid $1.75 million. The whistleblower will receive a total of $16.65 million from these settlements.

The United States did not intervene in this whistleblower case that was filed in September 2007.  The allegations were that several lenders participating in the federal student financial aid programs created billing systems that allowed them to receive improperly inflated interest rate subsidies from the Department of Education.

A settlement has been reached to resolve False Claims Acts allegations against Louis Dreyfus Energy Services who is accused of failing to pay money owed on natural gas acquired from the Department of the Interior.

The settlement agreement resolves contentions by the United States that from December 2004 to March 2008, Louis Dreyfus Energy Services made false claims or misleading statements to the Department of the Interior involving contracts to buy natural gas produced from federal oil and gas leases in the Gulf of Mexico. Starting in 2004, Louis Dreyfus agreed to pay the Interior Department for natural gas based on a price associated with the delivery of the gas at a fixed point along a natural gas pipeline. After its contracts with the Interior Department were executed, the company requested and received a discount in the price it would pay the Interior Department for the natural gas obtained under the contracts. The United States contends that this price discount applied only when there was a complete or near-complete constraint in the natural gas pipeline such that Louis Dreyfus was unable to transport natural gas along the pipeline. However, the energy services company claimed and obtained the price discounts even on days when it was able to ship natural gas along the pipeline. Thus, the United States contends that Louis Dreyfus was not entitled to the price discounts that it sought and received from the Department of the Interior.

A settlement has been reached in a whistleblower class action lawsuit brought against Bank of America who is accused of selling billions of dollars of Residential Mortgage-Backed Securities (RMBS) without disclosing to investors key facts about the quality of the securitized loans. 

The $16.65 billion resolution is broken down as follows;

• $10 billion will be paid to settle federal and state civil claims by various entities related to RMBS, collateralized debt obligations and other types of fraud.
• Bank of America will pay a $5 billion civil penalty to settle the Justice Department claims under FIRREA.
• Approximately $1.8 billion will be paid to settle federal fraud claims related to the bank’s origination and sale of mortgages.
• $1.03 billion will be paid to settle federal and state securities claims by the Federal Deposit Insurance Corporation (FDIC).
• $135.84 million will be paid to settle claims by the Securities and Exchange Commission.
• $300 million will be paid to settle claims by the state of California.
• $45 million to settle claims by the state of Delaware.
• $200 million to settle claims by the state of Illinois.
• $23 million to settle claims by the Commonwealth of Kentucky.
• $75 million to settle claims by the state of Maryland.
• $300 million to settle claims by the state of New York.

The bank has conceded that it originated risky mortgage loans and made misrepresentations about the quality of those loans to Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA).

This settlement also resolves the complaint filed against Bank of America in August 2013 by the U.S. Attorney’s Office for the Western District of North Carolina concerning an $850 million securitization. Bank of America acknowledges that it marketed this securitization as being backed by bank-originated “prime” mortgages that were underwritten in accordance with its underwriting guidelines. Yet, Bank of America knew that a significant number of loans in the security were “wholesale” mortgages originated through mortgage brokers and that based on its internal reporting, such loans were experiencing a marked increase in underwriting defects and a noticeable decrease in performance. Notwithstanding these red flags, the bank sold these RMBS to federally backed financial institutions without conducting any third party due diligence on the securitized loans and without disclosing key facts to investors in the offering documents filed with the SEC. A related case concerning the same securitization was filed by the SEC against Bank of America and is also being resolved as part of this settlement.