Fifteen years have passed since Thomas Swingle discovered that nearly $1 million of his family’s savings had vanished, victims of a $7 billion fraud orchestrated by financier Robert Allen Stanford. Swingle, now 72, recalls the devastating moment: “It was literally a lifechanging event. It is like someone hit you in the chest with a sledgehammer.”
As Stanford’s fraudulent scheme, which involved selling billions in counterfeit certificates of deposit, nears a resolution, many victims like Swingle are grappling with the reality that their past decisions may prevent them from receiving compensation. In 2021, Swingle and his wife, Cindy Finch, opted to sell their claim to any future settlement for approximately $60,000. Consequently, they will not receive any portion of the impending disbursements.
This decision highlights a troubling trend among fraud victims: desperate for immediate cash, many have sold their claims to investment funds, forfeiting their rights to future payouts. Swingle admits that at the time, he believed it unlikely that any compensation would materialize. “It didn’t turn out good for us,” he lamented, “but you gotta move on.” Had they held onto their rights, the couple could have claimed as much as $350,000.
Robert Stanford’s scheme lured investors with promises of unusually high returns on certificates of deposit issued by a bank in Antigua, leaving customers’ deposits unprotected by U.S. federal insurance. Despite scant information on how he could offer such lucrative rates, Stanford’s operation projected an image of wealth and success, complete with private jets and high-profile sponsorships. His aggressive marketing strategies employed numerous brokers across the U.S. to sell the dubious certificates.
The scheme came crashing down in February 2009, spurred by investigations from the Securities and Exchange Commission and concerns raised by a Bloomberg Businessweek article. Two months prior, Bernard Madoff had confessed to running an even larger Ponzi scheme. In 2012, Stanford was charged with diverting investors’ money for personal gain and is currently serving a 110-year sentence in federal prison.
After years of litigation, some progress has been made. In 2023, several banks, including Toronto-based TD Bank, agreed to a $1.2 billion settlement for claims that they ignored warning signs regarding Stanford’s activities. However, legal objections filed by Stanford have delayed the distribution of these funds.
Ralph S. Janvey, the appointed receiver, has begun making payments to Stanford’s victims. So far, he has disbursed approximately $609 million and has an additional $157 million to distribute from the settlements. Despite this, the total claims against Stanford still amount to around $4.9 billion, affecting over 20,000 customers globally. Many victims, like Swingle, are astonished that any compensation is being made available at all.
An estimated $700 million in claims have been sold to hedge funds and other investors in distressed assets. Annalisa Mendez, a 66-year-old resident of Austin, Texas, who lost $400,000 in the scheme, highlighted the distressing reality for many victims who felt compelled to sell their claims due to financial strain. “The horror here is a bunch of these hedge funds bought these claims from needy people,” she said.
Jean Anne Mayhall, 72, held onto her $500,000 claim while recounting the heartbreak of victims who died waiting for their payouts. “I know of more than a dozen victims who died waiting to get any money back,” she stated.
The opaque market for these claims has seen hedge funds purchasing them at varying rates. For instance, claims that once sold for 14 to 17 cents on the dollar have surged to 35 cents following the announcement of the banks’ settlement. While some victims have managed to retain their claims, others have not been as fortunate, often due to lengthy legal processes that have eroded their patience and financial stability.
Criticism has arisen surrounding the legal fees incurred during the recovery process, which have reportedly reached $463 million in fees and $67 million in expenses over the past 15 years. Angela Shaw Alexander, 52, a victim and advocate for those defrauded by Stanford, described these fees as excessive given the slow pace of recovery.
Janvey has expressed his regret over the lengthy proceedings but maintains that the complexity of the fraud necessitated extensive litigation. He asserts that while he believed federal authorities would pursue recovery actions against the banks involved, there has been little appetite for such efforts.
“I have been a receiver before, and there is nothing like Stanford,” Janvey acknowledged. “I understand all the frustration. I didn’t think it would take this long.” As payments begin to roll out, the hope remains that more victims will finally see a return on their lost investments, even as time runs short for many.
