Stanford Financial Group victims who lost more than $7 billion in a fraudulent investment scheme cannot get compensation from a financial services corporation created to compensate victims of financial fraud.
An appeals court judge in Washington, D.C., on Friday agreed with a district court’s earlier decision that victims of the Ponzi scheme could not get compensation from the Securities Investors Protection Corp., or SIPC. While sympathetic to their losses, the appeals court judge, like the district court, said the SIPC couldn’t be forced to pay compensation to the victims even though Stanford was a member of the SIPC.
The Securities and Exchange Commission had asked for a ruling by the appeals judge to overturn the earlier denial.
The SIPC was set up to pay victims of financial fraud from fees provided by financial services companies.
But the certificates of deposit were sold through Stanford International Bank, which was based in Antigua and was not a member of the SIPC, and both the district and appellate courts said that was the reason behind their rulings.
More than 22,000 investors worldwide lost their life savings and retirement funds through Stanford’s fraud, including thousands of Mississippians.
Stanford victims were promised high returns after investing in the CDs, but it was a classic Ponzi scheme in which investors were paid from money put in by earlier investors. The scheme came crashing down in February 2009 when federal officials raided Stanford offices across the country,
Former company CEO Allen Stanford was convicted in March 2012 of 13 counts of fraud and sentenced to 110 years of prison in 2012. SFG had an office in Tupelo, and its former chief financial officer, James Davis, and its chief investment officer, Laura Pendergest-Holt, were from Baldwyn and had offices in Tupelo and Memphis.
Davis was sentenced in early 2013 to five years in federal prison, his sentence lighter after cooperating with federal prosecutors. Pendergest-Holt was sentenced to three years in federal prison in September 2012.
As for the appeals court decision announced Friday, the Securities and Exchange Commission can appeal the ruling to the U.S. Supreme Court or to the full Appellate Court panel.