Stanford Group related to Madoff scheme? The SEC filed a lawsuit

Securities and Exchange Commission is suing Robert Allen Stanford and three of his companies Antigua- and Barbuda-based Stanford International Bank and its Houston-based subsidiaries, Stanford Group Co. and Stanford Capital Management for an $8 billion fraud.

“We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world,” said Rose Romero, regional director of the SEC's Fort Worth, Texas, office, in a press release.

The SEC filed a complain on Tuesday with U.S. District Court in Dallas seeking to prevent Stanford from further running its allegedly fraudulent activity at his aforementioned entities. U.S. District Judge Reed O'Connor entered a temporary restraining order, froze the defendants' assets, and appointed a receiver.

U.S. operations of Stanford Group cover an investment brokerage, wealth management, a private client group, stock research and merchant banking.

Stanford Group is accused by the SEC in misrepresenting to the company customers the information about $8 billion of investments it called “certificates of deposit” by promising returns that exceeded those offered by rival institutions. While Stanford told that the CD deposits were safe, were invested in liquid financial instruments, that the portfolio was monitored by more than 20 analysts and annually audited by Antiguan regulators authorities believe that they were related to Madoff Ponzi investment scheme.

The group denied any exposure of the investments with Bernard Madoff. But the regulators allege that they found internal documents in which Stanford Group executives expected a $400,000 loss from investments with Madoff. And while the bank advised its clients of just a 1.3% loss in 2008 the Standard & Poor’s 500 reported 39%.

The SEC’s complaint states that the company denies access to independent examination of those portfolios 90% of which are currently in a “black box” shielded from outside oversight. While in late November last year the group reported $8.5 billion in total assets Stanford Group reportedly has more than $50 billion in funds under management.