Eric Ben-Artzi has rejected his share of a $16.5m (£12.5m) payout, the third largest made by the SEC, which related to the exposure of false accounting at Deutsche Bank.

In mid-2015 the bank agreed to pay a $55m penalty to settle the charges, in which the SEC claimed that it had filed misstated financial reports during the height of the financial crisis that failed to take into account a material risk for potential losses estimated to be in the billions of dollars.

These related to a portfolio of derivatives consisting of ‘Leveraged Super Senior’ (LSS) trades through which the bank purchased protection against credit default losses. Because the trades were leveraged, the collateral posted for these positions by the sellers was only a fraction (approximately 9%) of the $98bn total in purchased protection. 

This leverage created a ‘gap risk’, and as credit markets deteriorated, the bank changed its methodology such that its financial statements showed no risk attached to the LSS trades, even though its own internal estimates suggested that it was exposed to a gap risk ranging from $1.5bn to $3.3bn during that time period.

In an opinion article published in the Financial Times, Ben-Artzi argued that the fine should be paid by individual Deutsche Bank executives, not shareholders.  He also alleged that there was a ‘revolving door’ of senior personnel who moved between the SEC and Germany’s largest bank, and that this had played a part in the executives going unpunished.

Neither the SEC nor Deutsche Bank have made a statement on the issue.

According to the paper, Ben-Artzi shared the whistleblowing award with a former Deutsche Bank trader.  The bulk of his award has been subject to claims from his ex-wife, lawyer and outside experts who worked on his submissions to the SEC.

The SEC’s whistleblowing programme was established in 2011, and allows for 10% to 30% of any penalty collected to be paid to those who bring original information that leads to an enforcement action.