Stanford Pleads Not Guilty in $7 Billion Ponzi Scheme

Texas billionaire Allen Stanford has pleaded not guilty to federal charges that he and others at his Stanford Financial Group banking and investment empire orchestrated a $7 billion Ponzi scheme that defrauded tens of thousands of investors around the world.

Stanford, 59, was criminally indicted last week months after the Securities and Exchange Commission brought civil charges against him and some of his top corporate officers. The SEC accused Stanford of fraudulently selling certificates of deposit in his Antigua-based Stanford International Bank that promised unrealistically high rates of return on the investments.

Prosecutors allege the investments were nothing more than a Ponzi scheme in which no real profits were earned and early investors were paid purported profits taken from funds contributed to the scheme by later investors.

Stanford was taken into custody after the indictment and appeared this morning in a Houston courtroom. The flamboyant, jet-setting financier who once owned ranked among the world’s richest men with a net worth of $2 billion, owned lavish properties in the U.S. and the Caribbean, and bankrolled teams in the sport of cricket, wore a bright orange jail jumpsuit and shiny metal bracelets also called handcuffs.

He and his lawyer have repeatedly denied he did anything wrong in selling investments and said the charges of a Ponzi scheme are not true.

Also charged in connection with the alleged investment fraud are Stanford’s chief investment officer Laura Pendergest-Holt, former Antigua financial regulatory agency chief Leroy King, and Stanford-affiliated accountants Mark Kuhrt and Gilberto Lopez, who are accused of assisting in the scheme.

Bail Sought

During today’s hearing, Stanford will ask for bail to be set, allowing him to get out of a Houston-area jail while he awaits trial on the charges. In order to be granted bail, Stanford will have to prove that he is not a risk to flee the jurisdiction to avoid prosecution and not a threat to commit further crimes if let out of custody.

The element of Stanford being a flight risk appears to be the major factor the judge will consider. While most of his personal financial assets have been seized for months, Stanford likely has friends and resources he could use to leave the United States in the event he is released.

Then again, as his attorney certainly will argue, Stanford has been free since February 2009 when the SEC first accused him of wrongdoing and he hasn’t gone anywhere since then. He even turned himself in to authorities when he learned of the federal indictment.

We are still waiting for word on whether Stanford will be granted bail, so check back for an update.

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