Finra arbitrators ordered Pershing to pay $648,543 to three victims of R. Allen Stanford’s Ponzi scheme.
The three-person, all-public panel ruled in a decision last Thursday that Pershing should have known that Stanford was perpetrating a massive investor rip-off when it served as the custodian and clearing firm for the Stanford Group Co.
Stanford was convicted in 2012 of committing a $7.2 billion fraud that revolved around selling certificates of deposit issued by his offshore bank, Stanford International Bank Ltd. in Antigua, and recommended by his firm’s financial advisers.
In the latest arbitration action involving Pershing’s connection to Stanford, more than two dozen claimants in two consolidated cases alleged that Pershing “gave material assistance” to the Ponzi scheme “despite having concerns about the CDs and SGC.”
The Financial Industry Regulatory Authority Inc. arbitration panel held Pershing liable. But the arbitrators awarded compensatory damages only to three of the investors — Charles A. Pope ($436,000); Joyce E. Cagel ($87,200); and the retirement account of Dudley Devore ($124,593).
“The panel finds that, based on all of the evidence and testimony presented, by the beginning of 2008, [Pershing] had the requisite level of knowledge, as to SGC’s wrongful conduct in connection with the CD scheme, that it knew or should have known that it was providing meaningful/substantial assistance to that wrongful scheme by remaining the clearing firm for SGC in the United States and, more particularly, by facilitating wire transfers for the purchase of CDs issued by SIBL on behalf of Charles A. Pope, Dudley Devore IRA, and Joyce E. Cagle during 2008,” the July 8 arbitration decision states.
The full roster of claimants requested $10.6 million in compensatory damages and $6.2 million in interest. One group filed their complaint in March 2020 and the other in November 2020.
Finra arbitrators rarely explain their decisions. Even though the panel laid out its reasoning for ruling against Pershing, it did not indicate why it denied awards for most of the claimants.
A spokesperson for Pershing said the firm does not comment on legal matters. Lawyers for the investors were not immediately available for comment.
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Andrew is half-human, half-gamer. He’s also a science fiction author writing for BleeBot.