A federal judge has dismissed the securities fraud lawsuit filed by two investors against the Securities and Exchange Commission for failing to report that Allen Stanford was running a $7.2 billion Ponzi scam. According to U.S. District Judge Robert Scola, a Federal Tort Claims Act exemption that does not allow claims from deceit or misrepresentation shields the SEC from such a claim.
The plaintiffs are George Glantz and Carlos Zelaya. They contend that they collectively lost $1.6 million because of Stanford and they wanted class action securities status for investors that the latter bilked.
They argued that following four exams between 1997 and 2004 the regulator considered Stanford’s business a fraud yet did not notify the Securities Investor Protection Corp., which provides compensation to those victimized by brokerages that fail. The SEC did not sue Stanford until 2009. While Scola previously had allowed this securities fraud case against the Commission to move forward, finding that the regulator breached its duty to report Stanford’s wrongdoing, now, he says that the FTCA exemption does not give him jurisdiction over this.
Glantz and Zelaya are not the only two investors to sue the regulator over the Stanford Ponzi scam. A Louisiana securities fraud case also was filed against the SEC in 2007 by eight investors who said the fraudster’s scheme cost them $18.7 billion. They accused the Commission of “negligence and misconduct” for allegedly allowing Stanford’s activities to go on for years after agency investigators detected warning signs.
Meantime, Stanford is serving 110 years behind bars. His Ponzi scam revolved around CDs sold by his Stanford International Bank that is based in Antigua.
Unfortunately, Ponzi scams continue to bilk investors each year. At our securities law firm, it is our job to help such investors recoup their losses. Contact our Ponzi scam lawyers today.
Stanford victims’ suit against SEC rejected, The Washington Post, August 13, 2013
Allen Stanford Investor Suit Should Be Dismissed, SEC Says, Bloomberg, April 8, 2011
Federal Tort Claims Act, NOLO
More Blog Posts:
US Supreme Court Considers Hearing Stanford Ponzi Lawsuits, Stockbroker Fraud Blog, October 3, 2013
SEC Gets Initial Victory in Lawsuit Against SIPC Over Payments Owed to Stanford Ponzi Scam Investors, Institutional Investor Securities Blog, February 10, 2012
Professional Athletes, Celebrities Often Targeted for Securities Fraud, Stockbroker Fraud Blog, August 14, 2013