Judge David C. Godbey sided with the Securities and Exchange Commission. In an emergency motion, the SEC said lawyer Ralph Janvey was targeting innocent investors who should not have to return their original investments in certificates of deposit at Stanford's bank in Antigua.
The CDs are central to what the federal government said was a massive scheme by Stanford and his company's top officers to defraud an estimated 20,000 investors.
Stanford and four executives, who also face criminal charges in Houston, are accused of advising clients to invest more than $7 billion in CDs from the Stanford International Bank and then misusing the money, in part to pay for Stanford's lavish lifestyle.
In a concession to Janvey, the judge agreed to extend by 10 days a freeze on accounts containing principal invested in CDs. The freeze was set to expire Monday, which would have allowed investors to get their money back.
The move gives Janvey time to appeal Godbey's ruling, which Janvey said he plans to do. Janvey is responsible for tracking down billion of dollars that federal prosecutors said was lost and try to help jilted investors.
Janvey said the $925 million he is trying to get back from 650 investors and former financial advisers
- a move known as a "clawback" - was money essentially stolen from roughly 20,000 other investors. Janvey wants to redistribute that money to Stanford's creditors and investors. The accounts Janvey is attempting to clawback generally contain at least $250,000, since most accounts containing less than that were already released to investors.
But the SEC said many of those 650 people also are victims. In Ponzi schemes, money is recycled by using new investments to pay people who made earlier investments. The SEC is often reluctant in such scams to assert claims against victims for the return of interest payments, but believes it is appropriate in this case, agency attorneys said.
Janvey wants to go even further by seeking to have victims return the principal they invested, the SEC said.
Left unsettled on Friday was whether the SEC would be able to take over clawback claims. SEC officials noted that Janvey and his team are charging about $1 million a week
- about $4,500 an hour - for their work. That money comes out of the Stanford money being returned to investors.
