The District Court Rules in Favor of the Receiver in His Claim to Recover Net Winnings Paid to Stanford "Net Winner" Investors
January 23, 2013
By U.S. Receiver (Ralph Janvey)
On January 23, 2013, the District Court entered a summary judgment order in favor of the Receiver finding that the
Receiver is entitled to recover from Stanford investors any funds they were paid in excess of the principal they
deposited in the Stanford fraud scheme. The Court ruled that the net winner investors' contracts with Stanford are
void and unenforceable and that the investors did not provide value for amounts they received from Stanford in excess
of the amounts they deposited. As a result, the Court held that that allowing the net winner investors "to keep their
fraudulent above-market returns in addition to their principal would simply further victimize the true Stanford victims,
whose money paid the fraudulent interest." Although the District Court's order is not a final judgment, the District
Court certified the order for appeal, which means that it will likely be appealed in the near future to the US Court of
Appeals for the Fifth Circuit.
The Receiver is pleased with the Court's ruling today that those investors who profited from the Stanford ponzi scheme do not have the right to retain those profits. This decision represents an important milestone in the very long and difficult process of unwinding the massive Stanford ponzi scheme. In his ruling, Judge Godbey agreed with the Receiver's position that the fictitious interest payments that Stanford made to investors on their Stanford International Bank certificates of deposit simply represented money taken from one set of investors and paid to another; it was just part of Stanford's efforts that kept the ponzi scheme going for well over a decade.
Based on his investigation, the Receiver identified over $220 million in net winnings or fictitious interest that was paid to over 800 investors. The Receiver intends to use this ruling to pursue recovery of these funds for the benefit of the thousands of investors who sustained significant losses on their Stanford CDs. Once recovered, these funds can be distributed to the victims of the Stanford fraud, which would be in addition to the $55 million that the Receiver has already proposed for distribution.
The Receiver is continuing to pursue recovery through litigation of other funds that can be distributed to victims, and he continues to work cooperatively with the U.S. Department of Justice and the Antiguan-appointed Liquidators to reach a final agreement to make available for distribution approximately $300 million in funds and assets currently frozen in foreign countries.
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