$6bn Hole in Fraud Case

Investigations into Allen Stanford’s Ponzi scam have revealed a $6bn hole, the appointed receiver Nigel Hamilton Smith has said.

Investigations into Allen Stanford’s Ponzi scam have revealed a $6bn hole, the appointed receiver, Nigel Hamilton Smith told Insolvency News today.

Hamilton Smith, head of corporate restructuring at Vantis Business Recovery, added that the 27,000 members of the public who invested in Stanford International Bank, were unlikely to see their full money again.

He said: “There is meant to be funds from the sale of certificates of deposits worth $7.3bn. However, the only assets existing are worth between $500m and $700m creating this $6bn hole in Stanford International Bank.”

Hamilton Smith, who was appointed by the Antiguan government, said of the investments: “All the money invested was siphoned away and spent on creating this huge financial empire. While it would be naïve to think Stanford didn’t stash away something, it certainly wasn’t billions.”

The Vantis boss said that the Stanford financial land assets were worth in the region of £150m, but the claims against Allen Stanford’s personal property assets were yet to be realised. Hamilton Smith said that the funds generated from the sale of the properties would go towards creditor's claims.

Vantis’s efforts to recover funds have so far been thwarted by US authorities. The group recently warned that the litigation surrounding its appointment as liquidator to Stanford International has meant it has been unable to recoup fees so far, and therefore revenues for 2010 will miss market expectations. As a result, Vantis’s house broker Ernst&Young put a “going concern” note on the accountancy firm.

The litigation surrounds conflicts around where the “centre of main interest” lies. The Republic of Justice in the United States has said that the funds in the UK, Canada and in Switzerland fall under the Proceeds of Crime Act, and as a result all funds have been frozen.

Vantis has so far failed to have the order obtained by the SFO lifted, which is delaying the release of funds. Hamilton Smith told Insolvency News that Vantis was now appealing to have the case fought in the Supreme Court, but this could take a year .

However he added that the SFO’s civil proceeding in the UK had failed – forcing it to take the criminal approach. But said: “It is strange that in the country where the fraud was perpetrated, the USA, there is no case involving proceeds of crime.”

Hamilton Smith is also applying for the Swiss authorities to release funds.

Posted at 02:51PM Apr 13, 2010 by Marc Stenton in Insolvency  |  Comments[0]