SEC Charges Texas Businessman With $8 Billion Fraud

The SEC has charged Robert Allen Stanford, a prominent Texas businessman, in connection with an $8 billion fraud in the sale of so-called certificates of deposit that promised unrealistic rates of return. Stanford guaranteed fixed-income investments by “promising improbable and unsubstantiated high interest rates,” according to a statement by the SEC.

“As we allege in our complaint, Stanford and the close circle of family and friends with whom he runs his businesses perpetrated a massive fraud based on false promises and fabricated historical return data to prey on investors,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement. “We are moving quickly and decisively in this enforcement action to stop this fraudulent conduct and preserve assets for investors.”

The SEC says the fraud is of “shocking magnitude,” and alleges that Stanford’s company sold “approximately $8 billion of so-called “certificates of deposit,” whose returns were supposedly earned through “SIB’s unique investment strategy, which purportedly allowed the bank to achieve double-digit returns on its investments for the past 15 years.”

In fact, the SEC claims that the bank’s multimillion dollar portfolio of assets was managed by a close circle of family and friends, including Stanford’s father, whose business experience is in cattle ranching and car sales, and Stanford’s college roommate, whose experience is unknown.

The New York Times says that in the complaint, the SEC is unable to account for the $8 billion in assets that were housed in the bank when it issued subpoenas for bank records. They’ve asked that Mr. Stanford and the other named executives be required to surrender their passports and for their assets to be frozen.

SEC Charges R. Allen Stanford, Stanford International Bank for Multi-Billion Dollar Investment Scheme [SEC]
U.S. Accuses Texas Financial Firm of $8 Billion Fraud [NYT]

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  1. JGKojak says:

    I hope some of these kinds of cases shut up the “blame the victim” crowd around here.

    A highly regulated industry (by the INDUSTRY’S accounting, anyway) offers up an investment opportunity, makes completely bogus claims that the average investment counselor has no ability to research/back-up, let alone a stand-alone investor.

    Blaming someone for investing in something like this is a little like blaming the convenience store for being robbed.

    Blame the criminal!

    • HIV 2 Elway says:

      @JGKojak: True but at the same time, if an investment looks too good to be true it probably is. People should know that.

      • lars2112 says:

        @HIV 2 Elway Resurrected: The only way I would “blame” the victim here is if one of two things are true:
        1. The bank was not a FDIC member
        2. Even if the bank was a FDIC member, your deposit was over the coverage level.

    • Rusted says:

      @JGKojak: Took two to dance that dance. The guy with the ponzi scheme and the ones that fell for it. As Warren Buffett warns, too good a profit is just as worrisome as a loss.

    • shmianco says:

      @JGKojak: still, crime doesnt even begin without the intent to do harm. no victim, still the intention! i’ve never approved a blame the victim explanation for a problem; except for that one time that lady burned herself on hot coffee at mcdonald’s and successfully sued…come on!

  2. sirwired says:

    Anybody who invests in a “CD” not issued by an FDIC-insured bank isn’t investing in what most people think of as a CD. You are giving money to a bank/fund/entity-with-a-bank-account-number who will do who knows what with it.

    Certainly it is true that even FDIC-insured banks do occasionally do stupid things with their deposits, and those banks do then fail, but at least there is SOME assurance that your money is going to something vaguely resembling a decent investment. And of course you have a decently ironclad guarantee that your principal will never disappear.

    Never forget that an interest-bearing deposit in any account is nothing more than a loan. As such, it should be evaluated the way you would evaluate anybody who would borrow money from you.

    • Snarkysnake says:

      @sirwired:

      Gotta agree here. This is not blame the victim,because the government and the banking industry has literally spent millions to condition savers to look for the FDIC logo at the front door,at the teller window and in all advertising. Reasonable people should have asked how an investment could be a “CD” without this stamp of legitimacy.

      That said, the body count is starting to get awfully high from the Madoff debacle.

      Is/was our financial system this rotten ?

  3. Yossarian says:

    Would it be “blaming the victim” to point out that the bank in question had no FDIC insurance, was based in Antigua, and was named after the guy running the company?

    • sleze69 says:

      @Yossarian: That’s crazy talk.

      On a completely unrelated topic, would anyone be interested in investing in CDs through SLEZE Bank? It is located in Haiti.

    • snowburnt says:

      @Yossarian: I’m starting a business called CASH4CASH. You give me money I give you money. it’s like a game cause you never know how much you’re going to get back

      • Ragman says:

        @snowburnt: At CASH4CASH, give us a legal tender bill of at least two digit denomination, and we’ll give you three times as many bills back!!! Make that thin wallet FAT!!!

  4. Blueskylaw says:

    The SEC says the fraud is of “shocking magnitude,”

    If $8 billion is of shocking magnitude, what do you call Maydoff’s $50 billion fraud?

    How come the SEC can catch an $8 billion Dollar fraud but not a $50 billion Dollar one that people have been saying for at least a decade now that it’s a fraud or a Ponzi scheme?

    • White Speed Receiver says:

      @Blueskylaw: Easy. No Sanfords married into the family of high-level SEC Officers.

    • econobiker says:

      @Blueskylaw: “We are moving quickly and decisively in this enforcement action to stop this fraudulent conduct and preserve assets for investors.”

      vs. like moving like molasses running uphill on the moon for our good friend Bernard Madoff…

    • working class Zer0 says:

      @Blueskylaw:
      The SEC says the fraud is of “shocking magnitude,”

      If $8 billion is of shocking magnitude, what do you call Maydoff’s $50 billion fraud?

      Exactly what I was thinking when I read that. I think $50 billion has already been established as “shocking magnitude”. Maybe $8 billion could be “eyebrow raising magnitude”

      • yasth says:

        @working class Zer0: Eh to be fair $50 billion is the ne plus ultra at the moment. The largest fraud ever, and in reality only under 20 billion was ever actually really invested the rest is just paper losses. I mean you wouldn’t claim that you lost 5 trillion if you gave me a penny and I gave you balance sheet saying you had five trillion before I ran away would you? We’ll just have to wait and see that the actual invested cash value was.

  5. Trai_Dep says:

    Have to say, it’s nice to see the SEC being more active in these kinds of cases now.

  6. starrion says:

    I’m going to start a hedge fund for canned goods and ammo.

  7. HogwartsAlum says:

    I’m putting my money in coffee cans in a secret place (not in my backyard or mattress).

  8. bohemian says:

    The whole trapping of credibility and reliability in the financial sector appear to all be window dressing on fraud and sketchy dealings. There is no way to tell who is lying. Marketing, presentation and worthless ratings systems don’t help either.

  9. QuiteSpunky says:

    Warren Buffet said you don’t know who’s swimming naked until the tide goes out. From the looks of it, the entire finance industry is just one large nudist colony.

  10. Anonymous says:

    Linda Chatman Thomsen, Director of the SEC’S Division of Enforcement says “We are moving quickly and decisively in the enforcement action to stop this fradulent conduct and preserve assets for investors.” Yet they did not detect the double digit returns on the Stanford’s company investments for the past 15 years. Is this Ms. Thomsen’s idea of quickly and decisively? A striking similarity to the Nadoff case. Sounds like yet another Ponzi type scheme that has gone undetected by the SEC for so many years?

    • econobiker says:

      @ZemarLubooian: Sure just like Madoff but now the SEC got spanked so people are hopping on those old dusty reports filled in the back of the cabinet and dredging up the computer backups to search for old emails reporting illegal activities…

  11. Borax-Johnson says:

    Glad to see the auditors were doing a bang up job.

  12. kwsventures says:

    All these white collar crooks need to be sent to a “Cool Hand Luke” chain gang prison. Hard, physical labor is what is called for. No country club prisons for these criminals.

    • Grrrrrrr, now with two buns made of bacon. says:

      @kwsventures: Better yet, they should be bound and gagged, and then turned over to the crowd of people who’s money they ran off with.