While some regulators have been warning about scamsters infesting the crowd-funding world, fraud sleuth Edward “Ted” Siedle is working the flip side of that coin: A crowd-funded effort to fund whistle-blower claims.
Mr. Siedle, president of Benchmark Financial Services Inc., has launched what he calls his Whistleblower Forensic Opportunity Trust and is asking for donations on the RocketHub crowd-funding site through the end of March.
So far, he's raised $750 from 14 funders, including several financial advisers.
The fundraising effort is meant to generate some publicity to help kick off a more serious attempt at funding the pursuit of whistle-blower claims: Mr. Siedle is trying to raise nearly $2 million in a private securities offering, which would give investors a chance at sharing in any awards he brought in.
Crowd-funding rules do not yet permit for-profit investments.
Mr. Siedle said he has about 120 whistle-blower claims filed with financial regulators, about 90 of them at the Securities and Exchange Commission. The agency is investigating at least three of those cases, he said.
Under the Dodd-Frank reform law, the SEC has set aside $452 million for payments to whistle-blowers, who can receive 10% to 30% of any monetary sanction the agency gets from a case that nets at least $1 million in penalties and originates from information disclosed by the whistle-blower.
Mr. Siedle's cases originate from his consulting work with institutional investors, who often aren't interested in pursuing a whistle-blowing claim.
Financial adviser Scott Dauenhauer of Meridian Wealth Management Inc., donated about $100 to Mr. Siedle's crowd-funding effort.
“We had a financial crisis because of a lack of people blowing the whistle,” he said. “I think that is one aspect of it, anyway.”
“Anything that brings attention to the more nefarious aspect of our industry, I'm for,” added Troy Tron, chief operations officer of Cirrus Capital Management LLC, who also gave Mr. Siedle some money.
Especially at larger financial firms involved in scandals, “it seems there are people above the law,” Mr. Tron said.