The United States Securities Exchange Com-mission (SEC) has asked a federal judge to prevent the court-appointed receiver from suing investors for proceeds they obtained in Stanford's US$7 billion alleged Ponzi scheme.

"The commission simply does not make a practice of suing innocent victims of Ponzi schemes for the return of principal, and applies a great deal of discretion and consideration before asserting claims against victims for the return of interest payments received," said David Reece, lead lawyer for the SEC.

Reece said further that the SEC "is not aware of any compelling reason" for the receiver, Ralph Janvey, to pursue Stanford investors.

The SEC's request to strip Janvey of his powers stems from the receiver's plan to file "possibly hundreds of additional claims against innocent investors on or before August 3", the date when US District judge David Godbey has ordered the release of most of the frozen accounts.

The accounts owned by some Stanford Group executives and employees will remain locked, pending further investigation, Godbey ordered.

Financial analysts say about US$4.7 billion in customer brokerage accounts, which 0were held by two clearinghouses used by Stanford Group Company, was caught up in the initial asset freeze.

The SEC said while the majority of customers' funds were unfrozen in March by a court order, Janvey continues to hold hundreds of customer accounts he suspects are tainted by fraud.

But he has not accused investors of any wrongdoing.

Janvey says he wants to ensure that investors who managed to redeem their SIB certificates before Stanford's scheme imploded don't benefit at the expense of others who could not cash out on time.

Best outcome

"The receiver's duty is to provide the best outcome for all investors, not just the small fraction of those who received redemptions," Janvey said.

"In reality, the money CD customers received was not their money, was not a return on their investment and was not generated by any of Stanford International Bank's other business ventures."

Instead, Janvey said the funds used to pay purported CD interest and redemptions came from thousands of CD holders who didn't retrieve their money before the SEC's crackdown.

Last week, the receiver sued five Stanford investors seeking recovery of US$3 million in proceeds from the SIB CDs.

Further hardship

Janvey said in a report last month that he hoped to recover as much as US$196 million in SIB CD proceeds from frozen investor accounts.

But Reece said such claims "would create further hardship on a small pool of victims and randomly penalise investors.

"It makes little sense to assert claims against these victims," he added.

- CMC