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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New York (HedgeCo.Net) – Wachovia customers who invested in auction rate securities prior to their collapse will most likely get their money back.  The SEC announced a settlement yesterday with Wachovia Securities that will provide $7 billion in liquidity to those clients, which resolves the agency’s original charges that the bank misled investors about the risks associated with ARS.

"The goal of the SEC in these matters was to return as much liquidity to investors as quickly as possible, while at the same time avoiding further disruption in the financial markets. Today’s final settlement with Wachovia represents substantial progress toward fulfilling that goal,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement.

The original SEC complaint alleged that Wachovia peddled ARS to clients, while representing them as safe, highly liquid investments, much like cash or money market instruments.  In addition, the agency charges that the bank became aware of the mounting risks associated with these investments, yet continued to market them as safe.  When the ARS market plummeted, thousands of clients were left with billions of dollars of illiquid investments.

"Wachovia did not ensure that its sales force understood the ARS products it was selling. As a result, Wachovia’s customers were not adequately informed of the nature and risks associated with ARS and were caught holding illiquid securities when the ARS market froze," explained Merri Jo Gillette, Director of the SEC’s Chicago Regional Office.

The settlement has several facets, including buying back ARS from investors who purchased them on or before February 13, 2008.  For more information on the matter, or for buyback eligibility, the SEC suggests you contact Wachovia directly at 1-866-283-7943.

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

HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
Be sure to check out our sister sites. www.hedgefundlounge.com, www.hedgefundtools.com, and www.hedgefundemployment.com

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