The company is also in trouble for ginning up fake data to bolster MF wrap. The SEC today charged Stanford Financial Group (SFG) chairman Allen Stanford and three SFG-affiliated companies with "orchestrating a fraudulent, multi-billion dollar investment scheme centering on an $8-billion CD program."

"Stanford and the close circle of family and friends with whom he runs his businesses perpetrated a massive fraud based on false promises and fabricated historical return data to prey on investors," says SEC Division of Enforcement director Linda Chatman Thomsen. "We are moving quickly and decisively in this enforcement action to stop this fraudulent conduct and preserve assets for investors."

Adds Rose Romero, head the SEC's regional office in Fort Worth, Texas: "We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world."

SFG couldn't reached for comment.

Along with Stanford, the SEC complaint names SIB, SFG-affiliated broker-dealer and RIA Stanford Group Company (SGC) and RIA Stanford Capital Management.

Unique investment strategy

Investors who have recently tried to take money out of the CDs -- which were issued by Houston-based SFG's Antiguan Stanford International Bank (SIB) subsidiary -- were told by SFG-affiliated financial advisors that withdrawals were subject to a 60-day moratorium on early redemptions, according to media reports.

As deposits with a non-U.S. bank, the SIB CDs are not insured by the FDIC.

The SEC alleges that SIB worked through a network of SGC financial advisers to sell about $8 billion in bogus CDs by promising "improbable and unsubstantiated high interest rates," the regulator says in a press release. "These rates were supposedly earned through SIB's unique investment strategy, which purportedly allowed the bank to achieve double-digit returns on its investments for the past 15 years."

SIB also falsely claimed to have re-invested client funds in a portfolio of liquid financial instruments that was monitored by a team of more than 20 analysts, and that the whole operation was subject to annual audits by Antiguan regulators.

A few months ago, as the market was processing the news of Bernard Madoff's alleged fraud schemes, SIB contacted CD holders to tell them that SIB had no exposure -- "direct or indirect" -- to Madoff's shenanigans; a claim the SEC characterizes as false.

Recently, as the market absorbed the news of Bernard Madoff's massive Ponzi scheme, SIB attempted to calm its own investors by falsely claiming the bank has no "direct or indirect" exposure to the Madoff scheme.

The SEC has also charged SGC with using "materially false historical performance data" to goose sales of its Stanford Allocation Strategy (SAS) mutual-fund wrap program and to poach big-book advisors from other firms. SAS went from less that $10 million in assets in 2004 to more than $1 billion in 2008, generating fees of $25 million in 2007 and 2008 alone. A U.S. District Court has frozen the assets of Stanford and appointed a receiver to marshal those assets.

Stanford, a Texan, styles himself "Sir" Allen by virtue of his appointment in 2006 as a Knight Commander of Antigua, his country of residence.

Civil suits against Stanford and the companies he controls have already been filed, and more are expected. -FWR

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