Fed'l Judge Nixes SEC Suit, Says SIPC Not Liable for Bank CDs Bought by Victims of Stanford Swindle
Posted Jul 03, 2012 05:12 pm CDT
A federal judge district court judge in Washington, D.C., has sided with the Securities Investor Protection Corp. in a lawsuit brought by the U.S. Securities and Exchange Commission in an effort to provide some reimbursement to the victims of the $6 billion to $7 billion Ponzi scheme overseen by R. Allen Stanford.
The SEC had contended that the congressionally chartered, industry-funded SIPC, which maintains a pool of money to compensate those who lose money when brokerages fail, was legally obligated to proceed with a liquidation effort on behalf of Stanford’s victims. However, U.S. District Judge Robert Wilkins agreed with the SIPC’s argument that the so-called certificates of deposit purchased from an offshore bank controlled by Stanford were bank investments not covered by the SIPC’s insurance fund, the Wall Street Journal (sub. req) reports.
According to the SEC, the CDs fell within the SIPC’s purview because, regardless of what they were called, they were purchased by investors through the Stanford Group, which is an SIPC member.
“The court is truly sympathetic to the plight of the SGC clients who purchased the SIBL CDs and now find themselves searching desperately for relief,” the judge said in his written opinion Tuesday. However, “this court has a duty to apply the [Securities Investor Protection Act] as written by Congress.”
Additional and related coverage:
ABAJournal.com: “Thousands Who Lost Money on CDs from Stanford’s Offshore Bank Are Likely to Be Repaid by SIPC”
ABAJournal.com: “SEC Sues SIPC, Seeks to Force Industry Insurer to Ante Up for R. Allen Stanford Customer Losses”
ABAJournal.com: “Federal Judge Sentences Onetime Billionaire Allen Stanford to 110 Years in Long-Running $6B Fraud”
Dow Jones Newswires: “Battle not over for victims of Allen Stanford”