SEC Awards $14.7 Million Award to Whistleblower for Exposing EB-5 Investment Fraud
In late-2012, a whistleblower (Michael Sears) provided a tip to the SEC about EB-5 fraud in a project run by Anshoo Sethi. According to the SEC’s complaint, Sethi was able to raise more than $145 million from EB-5 investors by making material misrepresentations about his EB-5 project to construct the “World’s First Zero Carbon Emission Platinum LEED certified” hotel and conference center. After raising the funds, Sethi diverted more than $2.5 million to his own personal bank account in Hong Kong. Fortunately for the EB-5 investors, Sears’ tip enabled the SEC to bring the scheme to an early halt before Sethi could steal more of the investors’ money.
On February 8, 2012, the SEC obtained an emergency court order to freeze the assets of Sethi and his companies in order to protect the remaining $147 million in investor funds. Shortly thereafter, on April 19, 2013, the court ordered the return of the $147 million to the investors and Sears became eligible to apply for an award.
On October 1, 2013, the SEC announced the more than $14 million SEC whistleblower award to, who was later determined to be, Sears. (Note: The SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity. As such, the SEC’s press release did not identify Sears as the whistleblower, nor did it disclose the actual amount of the $14.7 million award. Sears’ identity and the amount of the award were only revealed after his business partner, John Tung, filed a lawsuit against him for part of the whistleblower award.)