A federal appeals panel has rejected the efforts of the court-appointed receiver in the Stanford Financial scandal to recover millions of dollars from hundreds of Stanford investors who got their funds out before the alleged Ponzi scheme collapsed.
The court also lifted a court-imposed asset freeze which denied the customers access to their money.
The receiver, Dallas attorney Ralph Janvey, argued the money amounted to ill-gotten gains. He had sought to "claw back" the funds and distribute them equally to all 28,000 of Stanford's alleged victims.
The ruling, from a three judge panel of the Fifth Circuit Court of Appeals in New Orleans, agreed with Janvey that the investors' funds—proceeds from the redemption of Stanford certificates of deposit—were the result of ill-gotten gains from the Stanford fraud. But the panel ruled Janvey could not sue the investors for the funds now, since they received the proceeds legally.
The ruling does not appear to preclude Janvey from going after the investors in the future.
Janvey has claimed the clawbacks would allow him to return as much as 20 cents on the dollar to all the investors.
Nonetheless, the case was controversial, even among Stanford's alleged victims. The investors who were being sued argued they were innocent victims and were entitled to whatever money they were able to get out. But those who were unable to redeem their CDs before the bank collapsed argued the other investors were profiting at their expense.
Stanford collapsed in February after the Securities and Exchange Commission sued the company and its founder, Texas billionaire R. Allen Stanford, alleging that they ran an $8 billion Ponzi scheme.
Allen Stanford was later indicted on 21 criminal counts, and is jailed in Houston awaiting trial.