US judge rules HSBC and Toronto-Dominion Bank to stand trial for links to $7 billion Allen Stanford Ponzi scheme

The Toronto-Dominion Bank, HSBC Bank PLC and other banks linked to convicted fraudster R. Allen Stanford must stand trial for supporting his $7 billion Ponzi scheme and should repay defrauded investors, federal judge says .

On January 20, Judge David Godbey of the U.S. District Court in Dallas denied a request by the banks to avoid trial in a lawsuit filed on behalf of investors defrauded by Stanford, citing evidence that the banks knew his surgery was not up to par, but did it anyway. business with him.

The judge said in a written ruling that a jury should consider the evidence and recommended a trial in Houston, where Stanford’s investment firm was headquartered and where he was convicted in 2012 and sentenced to 110 years in prison for one of the biggest frauds in the United States. the story.

A group of Stanford investors filed a lawsuit after his 2009 arrest, alleging that TD Bank, HSBC, Societe Generale Private Banking and Trustmark National Bank provided financial services that supported and aided his crimes.

TD Bank, HSBC and SocGen did not immediately respond to requests for comment. Trustmark National Bank is reviewing Judge Godbey’s ruling and will continue to “defend itself vigorously”, said Mike King, the bank’s general counsel.

The banks, operating under a joint defense agreement, argued that the services they were providing did not constitute “substantial assistance”, as Judge Godbey said in his ruling. However, the judge said that even providing routine services for the Stanford plan inherently facilitated the financial transactions and operations that were its lifeblood.

Stanford’s scheme involved the sale of fraudulent certificates of deposit issued by its Antigua-based Stanford International Bank Limited. He claimed to invest in low-risk, high-return funds, but instead used the money to pay off other investors and fund his high-return lifestyle.

Several of the banks arranged “unusual” loans and extended credit to SIB or lent their reputation to Stanford, helping it open up new relationships or avoid scrutiny from other financial institutions it was involved with, according to the judge’s decision.

The suite of services “would allow a reasonable jury to conclude that the defendants provided substantial assistance in support of the wrongdoings of Stanford or Stanford entities,” the ruling says.

The ruling also said the evidence could support a reasonable conclusion that the various defendants each had some degree of awareness that SIB’s sale of certificates of deposit was improper or amounted to misrepresentation to investors.

The litigation against the banks is backed by a US-based receivership to recover funds for Stanford victims, which has raised more than $1 billion so far. Kevin Sadler, a receivership attorney, said Jan. 21 that he has worked with investors to hold banks accountable for billions of dollars in fraud losses and is glad the case is moving forward in Houston.

Independent of US-based legal initiatives, an Antigua bankruptcy estate has sued some of the banks in Canadian and UK courts, but has so far only reimbursed a fraction of the losses. amounting to $133 million, according to a report last August.

In 2021, TD Bank defeated a lawsuit brought by the liquidation estate in an Ontario court seeking nearly $4.3 billion in damages over allegations that the bank ignored red flags . Liquidators had argued there had been warnings before 2009 that should have warned the bank, but a trial court judge found TD employees had no reason to believe anything was wrong. was not going.

Stanford and its associates “went to great lengths to present SIB as a responsible bank with integrity” by hiring reputable bankers and accountants and presenting professional annual reports, according to the Canadian court. A UK court last April also dismissed claims against HSBC, a decision the liquidators are appealing.

Write to Alexander Gladstone at [email protected]

This article was published by Dow Jones Newswires

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