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Texas Money Manager Charged with $8 Billion Fraud

New York (HedgeCo.Net) – The Securities and Exchange Commission charged Texas businessman Robert Allen Stanford yesterday along with three of his companies for running a fraudulent $8 billion investment scheme.

"We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world," said Rose Romero, Regional Director of the SEC’s Fort Worth Regional Office.

According to the allegations, Stanford International Bank sold approximately $8 billion of so-called “certificates of deposit” under the pretense they would yield extremely high interest rates thanks to SIB’s unique and one-of-a kind investment strategy.  These CD’s were peddled as safe under the false notion that the bank re-invests the funds in liquid instruments while being under the constant supervision of 20 analysts and Antiguan regulators.

U.S. District Judge Reed O’Connor issued a temporary restraining order and appointed a receiver to the assets, which have all been frozen.    

“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 companies involved in the scheme include Antigua-based Stanford International Bank, broker-dealer Stanford Group Company and investment advisor Stanford Capital Management, both based in Houston.  In addition, the SEC charged SIB CFO James Davis and CIO of Stanford Financial Group Laura Pendergest-Holt for their involvement in the scam.

The SEC also slammed Stanford with a second charge, relating to a mutual fund scheme.   According to the complaint, Stanford Allocation Strategy was created to help SGC rake in $1.2 billion by using doctored performance reports to help sway investors.  The bogus data helped Stanford’s company grow from managing $10 million in 2004 to over $1 billion.    

Stanford, 58, known in the Caribbean as “Sir Allen” after being knighted there in 2006, has an estimated personal net worth of $2.2 billion, according to Forbes.

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

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