ICC Commercial Crime Service

Stanford Ponzi Scheme: Ruling Sends $5.5 Billion Suit Against TD Bank to Trial

Creditors of America’s second largest Ponzi scheme will get their day in courtas a result of a key ruling earlier this month by the Superior Court of Justice – Ontario. The court dismissed a motion for summary judgment from Toronto-Dominion Bank, which would have set aside a $5.5 billion claim against the bank by liquidators of Stanford International Bank (SIB). This decision in Canada, in a massive case that has played out in courts in several jurisdictions since 2009, is particularly meaningful. The ruling by the Honourable Barbara A. Conway opens the door for the case to proceed and victims’ claim to be heard. It comes after more than two years of work by our team of lawyers at Bennett Jones, representing the joint liquidators working to recover assets for victims.

On the heels of the Bernie Madoff investment scandal in 2008, the Stanford scam stunned the financial community and investors around the world. How could another Ponzi scheme have occurred under the noses of so many?

An offshore bank based in Antigua, Stanford International Bank, sold about $8 billion in high-yield certificates of deposits in what was a massive Ponzi scheme second only to the Bernie Madoff debacle. The scam was perpetrated primarily by Allen Stanford, SIB’s chairman and James Davis, chief financial officer. TD Bank was SIB’s main correspondent bank from the early 1990s to 2009 when the bank collapsed, and as such, “maintained accounts for SIB through which funds flowed between SIB and its investors for the purchase and redemptions of CDs” as outlined in Judge Conway’s decision.

In February 2009, the U.S. Securities and Exchange Commission (SEC) filed civil charges in the U.S. District Court for the North District of Texas (Dallas Division) against SIB, related entities, Stanford, Davis and others alleging a massive ongoing fraud. That same year, liquidators filed suit against TD Bank on behalf of SIB and its customers, for damages of US $5.5 billion for “negligence” and “knowing assistance”.

The decision to dismiss TD’s motion states:
"Essentially, the claim alleges that as SIB's correspondent bank from the 1990s to 2009, TD failed to act in accordance with the standard of care applicable to a reasonable banker…The plaintiffs allege that TD failed to conduct proper due diligence before it started providing banking services to an Antiguan off-shore bank, and compounded its negligence by continuing to provide banking services to SIB for 20 years. They allege that TD ignored public information and red flags that should have led it to terminate SIB's access to TD's facilities, report the conduct of Stanford and others to the appropriate authorities, and/or freeze SIB's accounts," the decision says.

TD’s motion hinged on its assertion the claim on behalf of SIB and its shareholders was filed after the two-year filing limit expired. TD argued that because of extensive media coverage and other information, SIB’s previous liquidators should have known that SIB had filed suit against TD before Aug. 22, 2009.

In her decision, Judge Conway says, “the parties acknowledge that the joint liquidators were not in office from February 16, 2009 to August 22, 2009 – it was their predecessors, the Former Office holders (first as receivers-managers and then as liquidators) who were in office, and it is the Former Office holders’ knowledge that is relevant in this case.”

However, in dismissing TD’s motion, the court ruled that without a trial, it could not determine when a possible claim against TD could have been discovered by previous SIB liquidators. The decision states, "the issue of when the former officeholders ought to have known that SIB had a potential claim against TD cannot be fairly adjudicated on this motion and is a genuine issue for trial."

The facts of the case will be laid out at trial, and our team looks forward to bringing those facts to light. However, for now this decision gives victims of this devastating financial crime the very least that they deserve -- their day in court.

Lincoln Caylor of Bennett Jones is recognized as a “leading counsel and commentator in the [asset recovery] field,” by Chambers Canada 2016 and is listed as a Most Highly Regarded Individual in North America by Who’sWhoLegal: Asset Recovery 2015. The sole Toronto member of ICC FraudNet, he is internationally recognized for leading state-of-the-art asset tracing investigations and pursuing asset recovery litigation and enforcement actions in prominent, high-value international financial frauds and other economic crimes.





ICC FraudNet is an international network of independent lawyers who are leading civil asset recovery specialists in each country. Recognized by Chambers Global as the world’s leading asset recovery legal network, our membership extends to every continent and the world’s major economies, as well as leading offshore wealth havens that have complex bank secrecy laws and institutions where the proceeds of fraud often are hidden. Founded in 2004 by the Paris-based International Chamber of Commerce (ICC), the world’s business organization, FraudNet operates under the auspices of the ICC’s London-based Commercial Crime Services unit.