R. Allen Stanford’s court-appointed receiver can’t have a preliminary injunction freezing at least $50 million a Libyan sovereign wealth fund recovered during the final days of the Ponzi scheme, an appeals court ruled.
“The funds sought by the receiver are property of a foreign state and are not subject to attachment,” a three-judge panel of the U.S. Court of Appeals in New Orleans said today. The order sought would be “functionally equivalent to an attachment,” the court said.
The receiver, Ralph Janvey, sought the freeze to prevent the Libyans from repatriating the funds from a New York bank account while he sues to recover the money for the benefit of defrauded Stanford investors.
The Libyans are the largest so-called net losers in the Ponzi scheme, which bilked more than 20,000 investors worldwide of as much as $7 billion through the sale of bogus certificates of deposit at Antigua-based Stanford International Bank Ltd. Net losers are investors who lost more money than they recovered from the scheme.
During late 2008 and early 2009, the Libyans withdrew about $51.6 million of the $139.6 million they invested with Stanford during the previous two years, according to the filing. U.S. securities regulators seized the Texas financier’s operations in February 2009, claiming Stanford was running a Ponzi scheme, paying older investors with money from new ones.
Kevin Sadler, Janvey’s lawyer, said the receiver won’t keep appealing for an injunction to prevent the Libyans from repatriating the money. He said the receiver will focus on the lower-court lawsuit seeking to recover the funds.
“The Libyan defendants received tens of millions of dollars in fraudulent transfers in the weeks prior to the collapse of the Stanford Ponzi scheme,” Sadler said in an e-mail. “The receiver will continue to pursue the recovery of those improper payments for the benefit of the victims of the Stanford fraud.”
Stanford, 62, was convicted of spearheading the fraud in March. He faces as much as 230 years in prison when he is sentenced tomorrow in Houston federal court.
The appeal is Janvey v. Libyan Investment Authority, 12-10240, U.S. Court of Appeals for the Fifth Circuit (New Orleans). The underlying criminal case is U.S. v. Stanford, 09cr342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09cv298, U.S. District Court, Northern District of Texas (Dallas).