CARIBARENA Antigua & Barbuda

The United States Securities and Exchange Commission (SEC) has asked a federal judge to prevent the court-appointed receiver from suing investors for proceeds they obtained in the

US$7 billion Ponzi scheme allegedly carried out by Texas billionaire Sir Allen Stanford.

Sir Allen is facing criminal and civil charges for the alleged “massive” fraud at his Antigua-based Stanford International Bank (SIB).

“The commission simply does not make a practice of suing innocent victims of Ponzi schemes for the return of principal, and applies a great deal of discretion and consideration before asserting claims against victims for the return of interest payments received,” said David Reece, lead lawyer for the SEC.

Reece said the SEC, the United States financial regulatory body, “is not aware of any compelling reason” for the receiver, Ralph Janvey, to pursue Stanford investors.  

He said the SEC’s request to strip Janvey of his powers stems from his plan to file “possibly hundreds of additional claims against innocent investors on or before August 3”, the date when US District judge David Godbey has ordered the release of most of the frozen accounts.

However, accounts owned by some Stanford Group executives and employees will remain locked, pending further investigation, Godbey ordered.

Some customers have been denied access to their accounts since February 17, when the judge froze all of Sir Allen’s personal and corporate assets and placed them under Janvey’s control while the SEC case is pending.

Financial analysts say about US$4.7 billion in customer brokerage accounts, which were held by two clearinghouses used by Stanford Group Company, were caught up in the initial asset freeze.  

The SEC said while the majority of customers’ funds were unfrozen in March by a court order, Janvey continues to hold hundreds of customer accounts he suspects are tainted by fraud. But he has however, not accused investors of any wrongdoing.

Janvey said the move is to ensure that investors who managed to redeem their SIB certificates before Stanford’s scheme imploded don’t benefit at the expense of others who couldn’t cash theirs on time.

“The receiver’s duty is to provide the best outcome for all investors, not just the small fraction of those who received redemptions,” Janvey said.

“In reality, the money CD [certificates of deposit] customers received was not their money, was not a return on their investment, and was not generated by any of Stanford International Bank’s other business ventures,” he added.

Instead, Janvey said the funds used to pay purported CD interest and redemptions came from thousands of CD holders who didn’t retrieve their money before the SEC’s crackdown.

Last week, the receiver sued five Stanford investors seeking recovery of US$3 million in proceeds from the SIB CDs.

Janvey said in a report last month that he hoped to recover as much as US$196 million in SIB CD proceeds from frozen investor accounts.

But Reece said such claims “would create further hardship on a small pool of victims and randomly penalize investors.

“It makes little sense to assert claims against these victims,” he added.

Last month, US prosecutors indicted Sir Allen in the alleged scheme. He pleaded not guilty to the charges, and faces life in prison, if convicted of the most serious of 21 counts of conspiracy, fraud and obstruction.

His chief investment officer Laura Pendergest-Holt, chief accounting officer Gilberto Lopez and global controller Mark Kuhrt have all pleaded not guilty to charges of involvement in the scheme.


Former Antigua banking regulator, Leroy King, who has also been accused by US authorities in the alleged fraud, is awaiting extradition to the United States.

 

< Prev		Next >