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Court Rules Against Victims of Ponzi Scheme

An appeals court on Friday dealt a blow to the victims of the financier Allen Stanford’s Ponzi scheme, ruling that they were not eligible to file claims seeking compensation for their losses. The decision, by the United States Court of Appeals for the District of Columbia Circuit, was a setback for the Securities and Exchange Commission. The S.E.C. had sought to overturn a 2012 Federal District Court decision that rejected the agency’s request to force the Securities Investor Protection Corporation to start proceedings to aid the fraud victims. “In declining to grant the S.E.C.’s requested relief, the district court expressed that it was ‘truly sympathetic to the plight’ of the victims,” Judge Sri Srinivasan wrote in a unanimous opinion. “We fully agree. But we also agree with the district court’s conclusion.” Allen Stanford was convicted of fraud and sentenced in June 2012 to 110 years in prison. Over the years, the Securities Investor Protection Corporation has handled prominent liquidations, including Bernard L. Madoff’s Ponzi scheme. But the corporation has said the Stanford victims did not qualify as “customers” under its charter because Mr. Stanford’s offshore bank was not a member of the corporation. More in the New York Times here.

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