Carson Block seemed an unlikely candidate for a multimillion-dollar SEC whistleblower award in March, and not just because he was under Justice Department investigation for potential stock manipulation.

For starters, the information he provided the SEC in 2011 wasn’t confidential, but instead had been blasted to thousands through emails and social media in a report he made public before sending to investigators. Block, the CEO of short selling firm Muddy Waters Inc., didn’t submit the required whistleblower tip form until years after the deadline outlined in the whistleblower program law, and then only after the commission finished its investigation of the company his online report exposed.

Yet a lawsuit filed in New York state court this week revealed that Block was the recipient of a $14 million award from the Securities and Exchange Commission in March, under a program designed to reward knowledgeable insiders who send confidential tips about corporate fraud.

The SEC paid him for a report he gave away for free a decade earlier, even though agency staff said he didn’t qualify for an award. The commission has given awards on less than 1% of the tips it receives.

The revelation sheds rare light on the SEC program, which keeps secrets well beyond its mandate to protect whistleblowers and often ignores its own rules when deciding who should get bounties...

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