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The former Wells Fargo chief security officer who helped expose the bank’s fake accounts scandal is appealing a decision to slash his whistleblower award by over $100mn, in a case highlighting how the Trump administration has shrunk the programme.
Michael Bacon, who ran the bank’s internal investigations unit, was told he was in line for a payout of $180mn until SEC staff cut the award to $55mn two weeks after the appointment of Paul Atkins as chair last year, court filings show.
The case has caused dismay among whistleblower lawyers worried over the direction of the programme, which is designed to uncover corporate wrongdoing by giving informants a slice of any fines.
Atkins has criticised the scheme in the past for encouraging “overindulgence” of allegations, and awards fell to about $60mn in 2025 from around $255mn in the last full year of the Biden administration.
Wells Fargo paid $2.5bn to the Department of Justice and $500mn to the SEC in 2020 after admitting its staff opened millions of unwanted accounts for customers to meet aggressive sales targets. Former executives paid $38mn more to settle related claims from the Office of the Comptroller of the Currency.
The SEC announced Bacon’s award last month with Wells Fargo and the claimant’s name redacted, as required by Congress, but their identities could be ascertained because details matched publicly known information.
The order detailed some of the dispute over the sum, but Bacon has not previously been identified as the awardee.
The SEC broke procedural rules and used a technicality to slash the award, Bacon claims, when he was entitled to at least 10 per cent of Wells Fargo’s legal settlements.
“On the one hand you have the SEC’s shifting positions, shifting rationales and shifting outcome, but the facts and circumstances have never changed: our guy was the primary whistleblower who led to one of the largest fraud recoveries in recent years,” his lawyer, Vincent McKnight, told the FT.
“This is the definition of arbitrary and capricious.”
Bacon was chief security officer at Wells Fargo until 2014 in a role that involved probing sales abuses by staff and collating data on the prevalence of the problem.
He provided prosecutors with testimony and documents setting out how executives had been aware of the abuses and failed to get the problem under control for more than a decade, according to depositions and interviews that Bacon gave to American Banker magazine in 2023 after the final cases were resolved.
“This was simple. It was easy to detect,” he told the magazine. “Executives knew it. And they chose not to act.”
Bacon this week filed a petition in appeals court in Washington asking for a review of the SEC’s award, marking the second time the matter has come before the courts. Last year, his lawyers petitioned for a writ ordering the SEC to move faster and provide more details of its deliberations. Like the SEC’s ultimate ruling, the petitions kept Bacon’s name confidential.
The writ was ultimately denied, but those court filings provide previously unreported information on the sums at stake and the timeline of events.
In July 2024, SEC staff issued a preliminary determination that Bacon should receive $179.5mn, calculated as a percentage of the full SEC settlement and half the DoJ recovery, they show.
Bacon had earlier received $1.6mn under a separate US government whistleblower scheme specifically related to bank fraud, which is why the SEC said he could not claim a percentage of the other half of the DoJ recovery.
Two weeks after Atkins became SEC chair in April 2025, SEC staff issued a new determination saying that they could not actually be sure how big a portion of the DoJ settlement Bacon’s award should be based on, according to the filings. Instead, they would give him no share at all, cutting the award to $54.5mn.
“The SEC’s creation of a so-called ‘superseding’ preliminary determination in order to change course abruptly five years after the initial whistleblower submission is without legal basis,” the filing claimed.
The SEC declined to comment.
Other whistleblowers have used the appeals court to challenge recent SEC decisions. Last week, the court ordered the agency to reconsider the case of one anonymous whistleblower whose claim it had denied, saying staff had not provided enough explanation for the decision.
Bacon’s award is the sixth largest made under the whistleblower programme, according to the SEC’s website. If it had remained at the original level, it would have been the second largest. If Bacon had been allowed a portion of the full DoJ settlement, it would have eclipsed the record of $279mn.
Additional reporting by Akila Quinio
