By Patsy R. Brumfield/NEMS Daily Journal
WASHINGTON – A federal district judge ruled Tuesday that U.S. securities regulators cannot force an industry-backed fund to start court proceedings so that victims can file claims.
Reuters reports the decision is a blow to the victims of Allen Stanford’s $7.2 billion Ponzi scheme.
In the lawsuit, the Securities and Exchange Commission sought to force the Securities Investor Protection Corp. to start liquidation proceedings for the victims.
SIPC argued that the 42-year-old Securities Investor Protection law does not apply in the Stanford case.
In his ruling, U.S. District Judge Robert Wilkins dismissed the SEC’s request, saying the agency “failed to meet its burden” of showing why SIPC should be compelled to act.
Allen Stanford was sentenced June 14 to 110 years in prison for bilking investors with fraudulent certificates of deposit issued by Stanford International Bank, his offshore bank in Antigua.
Since 2009 when Stanford was first arrested and charged, victims of the fraud have been fighting for SIPC to start a liquidation proceeding in the hope of getting back at least some of the funds they lost.
SIPC covers claims for investors of failed brokerages. It has handled many high-profile liquidations in recent years, including proceedings for Bernard Madoff’s Ponzi scheme and the collapse of Lehman Brothers and MF Global.
“The court is truly sympathetic to the plight” of the victims, Wilkins wrote. “But this court has a duty to apply the SIPA statute as written by Congress.”