TD Bank and two other banks have agreed to pay a combined $1.35 billion to settle a lawsuit accusing them of aiding disgraced financier Allen Stanford’s $7 billion Ponzi scheme.
TD Bank, or Toronto-Dominion Bank, agreed to pay $1.2 billion. HSBC Holdings is set to pay $40 million and Independent Bank – formerly Bank of Houston – $100 million. The settlements will need to be approved by a judge.
Former investors accused the banks of ignoring red flags and contributing to Stanford’s Ponzi scheme, one of the biggest in U.S. history. The three banks have denied wrongdoing.
What was Stanford’s Ponzi scheme?
Stanford and colleagues forged financial statements and lied to regulators about their financial condition to help bankroll Stanford’s lavish lifestyle. Thousands of investors, including small business owners and retirees, lost their life savings.
Stanford was arrested in 2009 and in 2012 was sentenced to 110 years in prison.
Banks deny wrongdoing
TD Bank, Independent Bank and HSBC denied any liability or wrongdoing.
“TD provided primarily correspondent banking services to Stanford International Bank Limited and maintains that it acted properly at all times,” the Canadian bank said in a Monday news release. “TD elected to settle the matter to avoid the distraction and uncertainty of continuing a long legal proceeding.”
TD Bank noted that a previous trial in Canada found no liability and ruled in its favor.
Independent Banks said it agreed to settle “to avoid the cost, risks and distraction of continued litigation,” according to a Monday financial statement.
An emailed statement from HSBC said it is “pleased to have resolved this claim, which relates to matters over a decade old, with no admission of any liability or wrongdoing.”
Two other defendants in the lawsuit – Societe Generale SA and Trustmark Corp. – already agreed to pay $157 million and $100 million, respectively.
Where does the money go?
If the settlements are approved, the receiver responsible for recovering assets for Stanford investors is set to collect more than $2.7 billion.
“This is nothing short of a monumental recovery,” said Kevin Sadler, a partner at law firm Baker Botts and lead counsel for receiver Ralph Janvey and the Official Stanford Investors Committee. “We look forward to obtaining prompt approval of the settlements and distributing these much-needed funds to the Stanford victims.”
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