Victims of the alleged $7 billion Allen Stanford Ponzi scheme may get a greater voice in how what's left of their investments will be divvied up.
The investors have reached a tentative agreement with the court-appointed receiver who is overseeing the liquidation of the defunct Stanford Financial empire.
Under the deal, which must still be approved by a federal judge, investors will get a seat on a new "official committee" overseeing the process. In exchange, the investors will drop their demand that the Stanford properties be forced into bankruptcy.
The receiver, Dallas attorney Ralph Janvey, who took control of Stanford's assets when the Securities and Exchange Commission sued the company in 2009, argued a bankruptcy filing would be expensive and counterproductive.
“We have essentially obtained all of the benefits of a bankruptcy filing for the victims while accommodating the Receiver’s legitimate concerns about the potential difficulties that such a filing would pose," said investors' attorney Peter Morgenstern in a statement.
The SEC sued Stanford and his company in February, 2009, alleging a massive Ponzi scheme based on bogus certificates of deposit issued by Stanford's offshore bank in Antigua. Some 28,000 investors holding $7 billion in CDs have essentially been left in limbo ever since.
Separately, attorneys for Stanford this week challenged the SEC's authority in the case, saying the agency does not have jurisdiction over the CDs, and demanding the suit be thrown out.
Stanford, who once claimed a net worth of $2.2 billion, remains behind bars without bail in Houston, awaiting his criminal trial in January, 2011.