SIPC Coverage for Stanford Fraud Victims

Stanford Victims Coalition - Seeking Justice for International Fraud

In February 2009, thousands of US citizens lost their lives savings totaling approximately $1.5 billion that was invested through Stanford Group of Companies operating in the US under SEC and FINRA oversight. Citizens from around the world lost another $6 billion. Prior to the SEC giving the Stanford Group of Companies permission to sell Regulation D securities in the form of certificates of deposit at US citizen-owned Stanford International Bank - Antigua starting in 2001, numerous US government agencies had knowledge of fraudulent activities involving Stanford. The FBI, DEA and the IRS all had previous investigations in to Stanford's international operations, all pointing to fraud. Investors were never warned. FINRA, a self-regulating organization operating under the SEC, fined Stanford for misleading investors about the safety of the CDs and for not maintaining a minimum capital level in 2007 and 2008. Investors were still not warned. Dozens of Stanford employees came forward reporting suspicions of fraud between 2001 and 2009. Depositors were still not warned. The SEC had warning from the Texas Securities Commission in 1999 that the activities of the Stanford Group of Companies, including SIB Antigua, were likely fraudulent. Again, investors were not warned. An SEC Inspector General audit report in March 2009 stated that the 20,000 annual SEC Regulation D offerings representing $609 billion were not properly monitored, citing several instances of misuse, non-compliance, and illegal acts regarding the Regulation D exemptions. In this instance, citizens were not warned until it was too late.

Despite regulatory negligence and inadequate inter-government communications, SIPC insurance has thus far been denied to Stanford victims. Stanford Group was an active SIPC member and the CDs were sold as SIPC insured. The SIPC logo was on Stanford Group broker business cards, marketing materials and other documents the SEC and FINRA monitored.

The Stanford Victims Coalition requests SIPC insurance be extended to the cover the CD losses. Barring this, the victims request the creation of a federal investment fraud insurance program to restitute the losses that were incurred under the SEC and FINRA's jurisdiction. Hundreds of billions of dollars are being allocated to financial institutions affected by the crisis in financial markets - a situation that will not be resolved until investors are confident in the markets again. The losses incurred by investment fraud like Madoff and Stanford are a significant contributor to the fear that is paralyzing the global financial markets. A very small number in comparison to the other TARP fund allocations could go a lot further to restore confidence not only in our government, but in our financial markets.