The Joint Liquidators Announce First Distribution

Antigua, January 20, 2014 – After receiving a number of proposals Joint Liquidators Marcus Wide and Hugh Dickson of Grant Thornton have entered into an agreement with ItalBank International of Puerto Rico, to act as distribution agents for dividend payments to Stanford International Bank creditors.

Creditors may choose either wire transfer or USD cheque. Forms for making that choice will be available shortly on the Joint Liquidators website for submission to ItalBank, and the bank will also be making direct contact with creditors to confirm details for transfers. ItalBank is offering new accounts to creditors as an economical and reliable option for receiving your distribution.

The first distribution will be 1%.

Any creditor who withdrew a substantial sum from SIB after 21 August 2008 during the run on Stanford International Bank may not be included in the first distribution. A separate notification from the Joint Liquidators explaining the legal background to this will be sent to the affected creditors. Also FAQs on this issue will be posted on the Joint Liquidators’ official website at

Read more and join the debate at

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group – SIVG official forum


Is the SEC Here to Help Defrauded Victims in a Ponzi Scheme, Or Not?

Posted by Kathy Bazoian Phelps

The Securities Exchange Commission (SEC) plays an active role in protecting the rights of investors. Its own mission statement is:

The mission of the Securities and Exchange Commission is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation.

Yet, in the high-profile Ponzi scheme case of R. Allen Stanford and Stanford Financial Bank, the SEC is finding itself aligned both for and against efforts to recover funds for the benefit of the defrauded victims. Positions taken by the SEC in two different pending litigation matters in the Stanford case may have polar opposite effects on the financial outcome for defrauded investors.

One case, SEC v. SIPC, now pending in the Circuit Court for the District of Columbia, involves a battle between the SEC and the Securities Investor Protection Corporation (SIPC) over whether the defrauded victims are “customers” under the Securities Investor Protection Act (SIPA) and therefore entitled to payment from SIPC. This is the first time that the SEC has ever commenced an action seeking SIPC coverage for investors. The lower court found that the Stanford investors are not entitled to SIPC coverage, but the SEC continues to champion the cause of the investors in the Circuit Court seeking SIPC coverage for them.

The other case, Chadbourne & Park LLP v. Troice et al., involves an appeal to the U.S. Supreme Court over the issue of whether Securities Litigation Uniform Standards Act of 1998 (SLUSA) bars lawsuits by a class of victims against third parties to recover their losses from alleged wrongdoers. The Fifth Circuit held that the claims against two law firms, an insurance brokerage firm and a financial services firm could proceed despite SLUSA. The U.S. Government, on behalf of the SEC and other agencies, filed an amicus brief with the Supreme Court arguing that the investor claims should be barred under SLUSA. If the Government’s position prevails, defrauded victims will be denied recovery on their claims.

In what would be a worst case scenario for the investors, the SEC will lose in SEC v. SIPC so that investors will be denied “customer” status and protection, and the Government’s position in the Chadbourne & Park case will prevail, denying investors the ability to use self-help to sue alleged wrongdoers.

At a quick glance, it seems that the SEC is on the wrong side of the SLUSA fight in Chadbourne & Park, given the potentially adverse consequences for investors if the SEC’s position is adopted. But perhaps the issue has more do with the way that the applicable statutes are written and interpreted than with any intent on the part of the SEC.

In Chadbourne & Park, the principal question to be considered by the Supreme Court is:

Does the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”), 15 U.S.C. 77p(b), 78bb(f)(1), prohibit private class actions based on state law only where the alleged purchase or sale of a covered security is “more than tangentially related” to the “heart, crux or gravamen” of the alleged fraud?

SLUSA prohibits a state law class action alleging a purchase or sale of a covered security “in connection with” an untrue statement or omission of material fact. A “covered class action” is a lawsuit in which damages are sought on behalf of more than 50 people, and a “covered security” is a nationally traded security that is listed on a regulated national exchange. So the question remaining is: What does “in connection with” mean?

The target defendants in the litigation at issue argue that “in connection with” covers the following two factual scenarios that touch “covered securities” in the Stanford case: (1) that Stanford lied to purchasers of CDs and told them that the CDs were backed by investments in stocks; and (2) that some of the CD purchasers must have liquidated stocks in order to purchase the CDs.

The Fifth Circuit did not agree that either of these two scenarios were sufficient to bar claims under SLUSA, holding that the purchase or sale of a covered security must be more than tangentially related “to the ‘heart,’ ‘crux,’ or ‘gravamen’ of the defendants’ fraud.”  The Fifth Circuit held that the claims against the defendants could proceed.

The Government, on the other hand, has taken the position in its amicus brief to the Supreme Court that the relevant language of SLUSA was taken from the Securities Exchange Act of 1934 and should be read consistently with similar language in Section 10(b) of the Act.  In urging a broad reading of the words “in connection with,” the Government contends that:

[A] broad reading is essential to the achievement of Congress’s purpose in enacting both Section 10(b) and SLUSA.  Under Section 10(b), it enhances the SEC’s ability to protect the securities markets against a variety of different forms of fraud. Under SLUSA, it furthers Congress’s objective of preventing the use of state-law class actions to circumvent the restrictions by the PSLRA [Private Securities Litigation Reform Act] and by this Court’s decisions constraining private securities-fraud suits.

In an amicus brief taking the contrary position, 16 law professors directly challenge the concept of broadening the application of SLUSA to include the certificates of deposit purchased by the Stanford investors. They note that the certificates of deposit are not themselves covered securities and argue that therefore SLUSA should be “interpreted in a way that does not preclude investors from using state courts to pursue claims seeking traditional state law remedies for acts that do not involve covered securities within the meaning of the federal securities laws.”

To stress their position that SLUSA should not apply to non-covered bank-issued securities that may be potentially backed by covered securities, the 16 law professors float the following hypothetical class action claims, among others, that they contend would improperly be prohibited under SLUSA if interpreted that broadly:

  • “A car dealer who lies to customers about the terms of a car loan, where the car loans are securitized in a pool and interests in the pool are sold off as covered securities.”
  • “A credit card company that securitizes credit card balances fails to pay appropriate wages to telephone operators and answering card holder questions, and the operators file a state class action alleging violations of state wage and hour laws.”
  • “A nationally-traded securities clearing firm engages in sex discrimination in compensating clerical workers for work done in the securities office, and the workers file a sex discrimination class action law suit.”

In summary, where the Supreme Court draws the lines on the application of SLUSA could have a significant impact on a variety of state law claims that may or may not have much to do with securities. The SEC stands behind a broad reading of SLUSA under the pretense of protecting the securities market, but its position appears to have the consequence of harming, not helping, defrauded victims by blocking state law damage claims.

The issues are undoubtedly complicated, and there are a variety of competing considerations. From the investors’ perspective, however, they can just add this to the list of roadblocks to getting their money back.

Read More:

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group – SIVG official forum


Kachroo Legal Services Update

June 2013
Dear Stanford Clients:
Potential Unauthorized Claims Made By Attorneys On Behalf of Investors
We have received multiple reports from clients that certain named attorneys have lodged claims with the receiver, purportedly on behalf of clients. These investors, however, have not authorized the attorneys in question to do so – and in some cases have never even heard of them.
If you believe that a claim has been lodged on your behalf without your authorization or knowledge, please get in touch as soon as possible and we can assist you in rectifying the situation and advise you on your rights.
Zelaya vs. United States of America
On May 13, 2013, a telephonic hearing occurred regarding the scope of the deposition that Plaintiffs are entitled to take of the SEC through its designated representatives.  The United States objected to all of the subject areas that the Plaintiffs sought to cover at the deposition and further objected to providing any documents in response to the document request that accompanied Plaintiffs’ notice of deposition of the SEC.  Plaintiffs responded, arguing that the Magistrate Judge authorized Plaintiffs to pursue those subject areas and also to serve the United States with a focused document request.  After briefing and oral argument, the Magistrate Judge overruled most of the United States’ objections and ruled that the Government must proceed with the deposition and provide Plaintiffs with the information requested in their related document request.  
This ruling in our favor enables us to continue our vigorous efforts to expose the negligent acts of the SEC and brings us one step closer to obtaining the information necessary to proving our case.
NAFTA and Other Bilateral Trade Agreement Arbitrations
We have recently become aware of potential new action being pursued by Peter Morgenstern and (separately) Todd Weiler, Edward Snyder and Edward Valdespino on behalf of various investors.  These investors have filed a notice of intention to submit a private arbitration against the United States under the arbitration provisions of the various treaties.  We are confident, however, that the current action in front of the Federal District Court in Florida against the SEC is preferable for investors for a number of important reasons:
1)      NAFTA and other similar agreements ensure that foreign investors are not treated unfavorably compared to domestic US investors. While many of the investors in the Stanford entities were indeed foreign, all of the evidence shows that that they were treated equally as badly as US investors;
2)      The treaties seek to ensure that the treatment of foreign investors does not fall below a minimum acceptable standard, as defined in international law.  In order to prove that it has, investors pursuing arbitration will have to establish essentially the same facts we have alleged in our Federal Court case. The difference between the proposed arbitration and our court case, however, is that we can rely on the strong discovery mechanisms to force the Government to disclose relevant information, whereas arbitration has much weaker and more limited powers.
3)      It appears that participation in this arbitration by Mexican investors may result in their inability to participate in our SEC class action.  Please note that there are subsequently three key issues to keep in mind if you are considering joining the arbitration: (1) the timeline and pressure being imposed on investors to make this decision appears unfair; (2) as far as we know, such an arbitration has never previously been taken and therefore no precedent exists for it; and (3) as far as your SEC action is concerned, you may be precluded from participating in the class action and may be considered an opting out of the class action in which you have already invested time, money and resources.
Our action has already overcome the key initial hurdle and has a defined path towards a successful verdict.  We know from our case that, in order to overcome the Government’s position on these claims, extensive discovery is necessary.  We do not believe that the procedural intricacies of a NAFTA international arbitration, including the limited means of discovery, provide the best avenue for recovery against the Government.  We believe the risk of being disqualified from participating in our SEC action far outweighs the potential for obtaining a successful judgment against the Government in the NAFTA international arbitration. 
The Investor Committee 
We have learned that significant changes to the Investor Committee composition have been occurring over the course of the past few months.  KLS will take this matter into serious consideration moving forward in its full representation of investor claims before the Dallas Receiver.
–          The KLS Stanford Team 


Visit the Stanford International Victims Group – SIVG

official forum


Stanford Judge Approves Interim Distribution to Victims

By Tom Korosec & Andrew Harris – May 30, 2013 9:42 PM GMT-0400

 A plan by a court-appointed receiver to distribute assets recovered from R. Allen Stanford’s Ponzi scheme to investors was approved by a federal judge in Dallas.

U.S. District Judge David C. Godbey accepted the plan by Ralph Janvey, the receiver appointed in 2009 to marshal and liquidate Stanford’s personal and business assets, to make a $55 million interim distribution to about 17,000 claimants, or about 1 cent for each of the $5.1 billion lost in the fraud scheme.

“We will follow it up in a subsequent distribution as the money comes in,” Janvey’s attorney, Kevin Sadler of Baker Botts LLP, told Godbey at a court hearing in April.

Ponzi scheme victims of Bernard L. Madoff, who was arrested in December 2008, recovered more than $5.4 billion. Clients of the MF Global Inc. brokerage were paid about $4.9 billion after its parent, MF Global Holdings Ltd., failed in October 2011. Victims of a scheme by Peregrine Financial Group Inc. founder Russell Wasendorf, who prosecutors last year said stole $215 million, received an interim distribution of $123 million.

A federal jury in Houston last year found Stanford, 63, guilty of lying to investors about the nature and oversight of certificates of deposit issued by his Antigua-based bank. The jurors decided he must forfeit $330 million in accounts seized by the U.S. government.

The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-00298, U.S. District Court, Northern District of Texas (Dallas). The criminal case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston).

For a full and open debate on the Stanford Receivership visit:

The Stanford International Victims Group Forum

Eighty-nine investors defrauded by imprisoned financier Robert Allen Stanford are seeking $115 million from seven insurance companies in addition to claims that could total as much as $1 billion against the Louisiana Office of Financial Institutions and SEI Investments Co. 

Stanford, who was indicted by a federal grand jury for frauds exceeding $7 billion, is currently serving 115 years behind bars.

According to reports emanating out of the United States, six of the insurers responded earlier in March by transferring the investors’ four-year-old state court suit to Baton Rouge federal court, action the investors have fought hard in the past.

“We feel confident that this case should not be removed to federal court, because the state court has already ruled on it and granted the investors class-action status,” said Phillip W Preis, Baton Rouge attorney for the investors.

The investors sued OFI and Pennsylvania-based SEI in 19th Judicial District Court in Baton Rouge in 2009. That was soon after the Securities and Exchange Commission shut down Stanford’s worldwide operations and alleged his investment programme was nothing more than a fraudulent scheme.

However, a federal judge in Dallas, where the SEC had filed its complaint, yanked the Louisiana investors’ suit into his Texas court and then dismissed the case, a US online news site, The Advocate, reported.

It added that the Dallas judge ruled in 2011 that the Baton Rouge investors’ suit violated a Securities Litigation Uniform Standards Act prohibition against state court litigation that could negatively affect the nation’s financial markets.

Last year, however, a three-judge panel of the US 5th Circuit Court of Appeals overruled the Dallas judge and concluded that investors could pursue recovery of their losses in Baton Rouge state court.

“That returned the investor claims to state District Judge Michael Caldwell, who held hearings on disputed allegations that OFI knew of Stanford’s misdeeds and should have warned investors, as well as a complaint that SEI ignored a duty to tell investors that Stanford’s assets were grossly overvalued,” The Advocate reported.

“Caldwell issued a judgment last year that certified the investors’ suit as a class action, meaning that all people who lost investments at Stanford Trust Co’s Baton Rouge office could join the suit as plaintiffs against SEI, OFI, and now SEI’s seven insurers.”

Caldwell has not yet scheduled a trial for the case, The Advocate said.

The US Supreme Court has agreed to hear arguments on appeals of related Stanford investor cases in October.

The six insurers that transferred the dispute last month to US District Judge James J Brady are: Allied World Assurance Co (US) Inc, Continental Casualty Co, Arch Insurance Co, Indian Harbor Insurance Co, Nutmeg Insurance Co, and certain underwriters at Lloyd’s of London.

Those insurers told Brady a seventh firm – Endurance Specialty Insurance Ltd of Bermuda – did not join their motion because Endurance officials had not yet been served with a copy of the investors’ suit.

For a full and open debate on the Stanford Receivership visit:

The Stanford International Victims Group Forum

Stanford Victims Will Benefit From $300M Settlement

In a huge step forward for R. Allen Stanford’s cheated investors and creditors, a settlement aims to break the logjam over who is entitled to $300 million worth of frozen assets around the world.

When Stanford’s Ponzi scheme was exposed in 2009 and his business went under, it spawned a global hunt for his many assets to repay his investors and creditors. But those involved in the search—U.S. government agencies, a U.S.-court appointed receiver and the liquidators of Stanford’s Antiguan bank—fought in courts across the world over who controlled the various assets.

The settlement, announced last week and subject to the approval of several courts in the coming weeks, will resolve the years-long battle. It will also speed efforts to return money to those who invested in certificates of deposit issued by Stanford International Bank, a scheme through which Stanford ultimately cheated investors out of $7 billion. Stanford used investors’ cash to further the fraud and fund a lavish lifestyle in which he accumulated real estate, yachts and other assets around the world.

The U.S. receiver warned in court papers that if the settlement isn’t approved, “millions of dollars in assets that could otherwise be distributed to the victims of the Stanford Ponzi scheme will remain tied up in the courts.”

Some of the specific deal terms include handing over $44 million of assets frozen in the U.K. to the Antiguan liquidators, which they’ll distribute to victims in that court proceeding. The liquidators will get another $36 million from the U.K. to fund their continued search for more assets.

More than $132.5 million that was found in Switzerland and $23 million in Canada will be forfeited to the U.S. Department of Justice, which will allow that to be distributed through the U.S. receivership. Antiguan victims will get another $60.5 million from Switzerland.

The settlement doesn’t allow the distribution of any of the $300 million in frozen assets to be paid to two government creditors, the Internal Revenue Service and Antiguan government.

The settlement is subject to the approval of the U.S. District Court in Dallas, the Antiguan court and London’s Central Criminal Court.

Convicted last year of fraud, conspiracy and other criminal charges, Stanford is now serving a 110-year prison sentence. He has insisted he did nothing wrong and has appealed his conviction and sentence.

For a full and open debate on the Stanford Receivership visit:

The Stanford International Victims Group Forum