Judge Extends Seizure of Some Stanford Financial Assets, Unfreezes More Client Accounts

Assets belonging to Texas billionaire Allen Stanford will remain frozen indefinitely pending a federal investigation into an alleged Ponzi scheme, but thousands more investor accounts will be unfrozen, a federal judge has ruled.

Bank accounts and other property connected to Stanford International Bank have been frozen since February 2009, when the Securities and Exchange Commission accused the flamboyant financier of orchestrating an $8 billion fraud involving sales of certificates of deposit in his bank.

Stanford Financial clients unable to access their funds have complained they cannot pay mortgages or cover other expenses. Some have sued the court-appointed receiver overseeing operations of Stanford Financial Group during the federal probe, seeking access to their accounts and accusing authorities of freezing their funds without justification.

Preliminary Seizure Extended

On March 12, 2009, U.S. District Judge David Godbey extended a previous preliminary order freezing assets linked to Stanford Financial until a civil trial on the charges has been held. Assets held by Stanford International Bank, Stanford Group Co and Stanford Capital Management are covered by the court order, which replaces the preliminary order that was set to expire today if it had not been extended.

It is believed that Stanford is worth billions in real estate, private jets, and other personal assets.

More Brokerage Accounts Released

The judge also granted a request by receiver Ralph Janvey to release about 16,000 client accounts with approximately $4.1 billion in assets. The brokerage accounts are held by JP Morgan Clearing Corp and brokerage accounts managed by Stanford-affiliated companies.

Another 4,000 Stanford Financial accounts with assets of $1.8 billion remain frozen. Those accounts that include those related to the CDs issued by Stanford’s offshore bank and those controlled by defendants or some employees.

Earlier this week, the court released back to investors thousands of frozen brokerage accounts over $250,000 and held by Pershing LLC.

The accounts had been temporarily frozen as the SEC and other investigators sought to retain as many client funds as possible while sorting out the fraud charges against Stanford. It is hoped that creditors and clients of Stanford Financial may be reimbursed for their debts and losses, but the amount that is left to be returned remains a mystery.

SEC Charges Massive Fraud

Stanford and one of his top aides, James Davis, are accused by the SEC of a massive Ponzi scheme involving high-yield certificates of deposit in Antigua-based Stanford International Bank. In a Ponzi scheme initial investors are paid profits from funds contributed by subsequent investors in the operation.

A former Stanford Financial chief investment officer also is charged with a crime for lying to SEC investigators and obstructing the government’s investigation.

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