TD Bank, HSBC Holdings and Independent Bank have agreed to settlements totaling $1.34 billion in the case of Allen Stanford’s $7 billion Ponzi scheme. The banks were sued by investors who said the financial institutions failed to recognize Stanford’s fund as a Ponzi scheme and failed to act.
Stanford was arrested in 2009, not long after Bernie Madoff’s Ponzi scheme came to light. Stanford’s fund was accused of forging statements and lying to regulators. As a result, thousands of investors, including many retirees, lost their life savings. In 2012, Stanford was sentenced to 110 years in prison.
TD Bank is paying the most to settle the matter – about $1.2 billion. In a statement, the bank said it is happy to put the issue to rest.
Denies wrongdoing
“As has been the case throughout these proceedings, TD expressly denies any liability or wrongdoing with respect to the multi-year Ponzi scheme operated by Stanford and makes no admission in connection to any Stanford matter as part of the settlement,” the company said. “TD provided primarily correspondent banking services to Stanford International Bank Limited and maintains that it acted properly at all times.”
Federal and Florida state regulators moved in on Stanford in February 2009, at about the time the Madoff Ponzi scheme was coming to light. In both cases, the financial crisis of late 2008 caused investors – who believed their money had been safely invested in financial assets – to begin withdrawing their money.
But neither fund had actually invested the money and both were depending on new deposits to pay returns to existing investors.
Court will have the final say
The settlement with the three banks must be approved by the court. Assuming that happens, some investors who lost money to the Stanford fund are likely to get some of it back.
Stanford Receiver Ralph Janvey and the Official Stanford Investors Committee (OSIC), reached settlements totaling $1.345 billion with the remaining defendants in the case after securing funds in settlements from two other banks. The total now is around $2.7 billion.
“This is an extraordinary result for the victims of the Stanford fraud. Given all the challenges faced by the Receivership since 2009, this is nothing short of a monumental recovery,” said partner Kevin Sadler, lead counsel for the Receiver and OSIC. “Over the past fourteen years, the Receiver and his team of professionals has worked tirelessly for the benefit of the Stanford investors. We look forward to obtaining prompt approval of the settlements and distributing these much-needed funds to the Stanford victims.”