New Whistleblower Awards Leads to Surge in Fraud Tips

New awards for informants who help the Securities and Exchange Commission uncover fraud are already prompting a surge in tips.

The Dodd-Frank financial law passed in July provides for the larger bounties, with the hope of fingering wrongdoers such as Bernard Madoff before they swindle thousands of people.

People who supply “original information” about large frauds could net as much as 30% of the penalties and recovered funds collected by the SEC, which could add up to a multimillion-dollar payout.

Defense lawyers warn that the bounty program could spawn a flood of frivolous cases that create headaches for companies.