Stanford Financial charged with 'massive' fraud
Stanford Financial charged with 'massive' fraud
Firm being probed for paying high CD yields even as markets have slid
BREAKING NEWS
msnbc.com staff and news service reports
updated 4 minutes ago
Federal regulators on Tuesday charged Texas financier R. Allen Stanford and three of his companies with a "massive" fraud that centered around high-interest-rate certificate of deposits.
In a complaint filed in federal court in Dallas, the Securities and Exchange Commission alleged Stanford orchestrated a fraudulent investment scheme centered on an $8 billion CD program that promised "improbable and unsubstantiated high interest rates."
Stanford's assets, along with those of the three companies, were frozen. Stanford's companies include Antigua-based Stanford International Bank and broker-dealer Stanford Group Co. and investment adviser Stanford Capital Management, which are both based in Houston.
The bank's chief financial officer, James Davis, and Stanford Financial Group's chief investment officer, Laura Pendergest-Holt, were also charged in the complaint.
Alfredo Perez, a spokesman for the U.S. Marshal's Service in Houston, confirmed that agents raided Stanford's office in Houston Tuesday morning, but he did not have any other immediate comment.
A sign hanging at the firm's office in Houston says it is now "under the management of a receiver," according to a Reuters eyewitness.
The SEC alleged Stanford and his businesses misrepresented the safety of the deposits, claiming the bank reinvested client funds in liquid financial instruments to help return profits on investments sharply higher than average rates than similar products.
The SEC is cooperating with the Financial Industry Regulatory Authority, the U.S. brokerage industry's self-policing body, as part of the ongoing investigation.
The SEC's outgoing enforcement chief Linda Chatman Thomsen says Stanford and his family and friends "perpetrated a massive fraud based on false promises and fabricated historical return data to prey on investors."
The news may further undermine investor confidence already shaken by allegations that famed money manager Bernard Madoff may have orchestrated a $50 billion Ponzi scheme.
A Stanford spokesman was not immediately available to comment.
The SEC, the FINRA and state regulators in Florida and Texas have been investigating Stanford, which has 30,000 clients in 131 countries.
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