(Bloomberg) -- Wall Street’s cops are finding themselves partnered with an unlikely star witness against misbehaving firms: short sellers.
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Alongside their public reports, short sellers are quietly sharing their research about sketchy accounting and other misdeeds with the US Securities and Exchange Commission’s whistleblower office in hopes of making some extra money.
The practice is widespread, with big-name short sellers Nate Anderson, Kyle Bass and Carson Block among the tipsters. If the SEC investigates and levies a fine, a short seller can collect up to 30% of the proceeds. That’s on top of any profit they might make by betting on the stock’s decline.
The whistleblower program is open to all comers — including short sellers, corporate insiders and random internet investor — and the would-be informants can’t get enough of it. They’ve flooded the agency with over 18,000 formal tips in the 2023 fiscal year. For perspective, that 12-month tally is double the total of all SEC enforcement actions over the past 10 years.
Tips based on short-seller research potentially give the SEC a head start on probes, but they also create some tricky...
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