How Much is a Whistle Worth: Hedge Funds Begin to Invest in the Costs and Rewards of Whistleblower Cases


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Hedge funds received a black eye, in the financial turbulence of the last several years. But experts still give them credit, as predictors of where the economy needs to move: and how to get it there. So the pioneering uses of hedge funds, in whistle blowing cases, is an interesting study in capitalism and possible a new era of accountability. The government, it seems, often frustrates whistleblowers, who need their entitled rewards, by not being able to inform the Whistleblower about the status of the case. The government takes ‘anonymity’ very seriously. Happily for whistleblowers, so are many hedge fund investors.

The government’s whistleblower program is getting competition, it seems, from a natural nemesis: hedge funds.

Besides, Whistleblowers have been instrumental in coming to grips with understanding more of what actually did happen in the whirlwind days of mortgage meets and marries derivatives. Or the generic package still being addressed as Mortgage Backed Securities MBS). One whistleblower recently described himself as a “continuing coward” for his reluctance to come forward as a true whistleblower: believing any rewards under statute (from 10-30%) will not be offset by his worry over personal suits for defamation.

The New York Times, however, has been digging to see how hedge funds, whether tied to MBS or not, evaluate the supply side of those securities. especially Whistleblower claims.…/20whistleblower.htMany. Many hedge funds, however, are asking for as much as two-thirds of anticipated Whistleblower awards…whereas typical litigation hedge funds usually take as little as 5%, or as much as 50% for the most risky cases..

According to the Times, hedge fund operators are essentially offering their own incalculable rewards for whistleblower information. But they are being more definite about what that information is worth. While government payoffs to whistlers often is protracted (three years or more) and even subjective (the federal program may unilaterally lower awards), hedge funds deal in the most practical terms. Because many whistle blowers are at imminent risk of exposure, and losing their jobs, hedge fund payments offer attractive incentives to an industry where Information remains King.





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