Robert Allen Stanford, the chief of the Stanford Financial Group, has been accused of fraud in the selling of approximately $8 billion of high-yield certificates of deposit that were held in the firm’s offshore bank in Antigua. The Securities and Exchange Commission called the suspected activities a “massive ongoing fraud.”
Stanford’s director and chirf financial officer, James Davis, and Laura Pendergast-Holt, the firm’s chief investment officer, were also charged. They are said to have misrepresented the safety and liquidity of unisured CDs issued by Stanford.
Marketing materials from the bank falsely stated that client funds would be placed in liquid financial instruments, the SEC claims. According to evidence collected by the SEC, client funds were invested in private equity funds and real estate and the rates quoted for clients were significantly higher than most American banks. The filing stated that Stanford had offered rates of more than 10% on five-year CDs, while many American banks offered less than 3.2%.
After ignoring repeated warnings about the massive $50 billion Ponzi scheme run by Bernie Madoff, the SEC seems to be increasing the scrutiny on returns that seem to good to be true.