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A private investor is seeking $7 million in a lawsuit against short seller Carson Block and his equity research firm Muddy Waters LLC in a dispute over an approximately $14 million whistleblower award by the Securities and Exchange Commission.

Kevin Barnes said he worked with Mr. Block on a report on Focus Media Holding Ltd. that formed the basis of a SEC action, and that the two had agreed to share proceeds from legal or regulatory actions stemming from their research on the China-based advertising company. Mr. Block is known for investigating Chinese companies.

The details of the SEC award in relation to the Focus Media case, the process of which began more than a decade ago, highlight the often lengthy and complex road to winning a whistleblower award from the regulator.

The 2010 Dodd-Frank Act established the SEC cash-for-tips program. It awards whistleblowers between 10% and 30% of monetary penalties when tips result in successful enforcement actions and when penalties exceed more than $1 million.

According to the lawsuit filed by Mr. Barnes in New York Supreme Court on Monday, the SEC granted Mr. Block the whistleblower award in March and he declined to compensate Mr. Barnes for his contribution to the report on Focus Media, which was published in 2011.

The lawsuit also alleges Mr. Block and Muddy Waters improperly asserted exclusive control over the report.

The SEC doesn’t publicly name...

Read Full Story: https://www.wsj.com/articles/short-seller-carson-block-sued-over-14-million-w...