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Janvey v. Adams

United States Court of Appeals for the Fifth Circuit

November 13, 2009, Filed

No. 09-10761 Consolidated with No. 09-10765

Opinion

 [*833]  DENNIS, Circuit Judge:

This is an appeal from the denial in part of a preliminary injunction pursuant to 28 U.S.C. § 1292(a)(1).  [**4] The underlying case is ancillary to a securities fraud action by the SEC against a bank and related companies. SEC v. Stanford Int'l Bank, Ltd., No. 3-09-0298-N, 2009 U.S. Dist. LEXIS 73074 (N.D. Tex.).

This case arises out of an alleged multi-billion-dollar Ponzi scheme perpetrated by the Stanford companies ("Stanford"), a network of some 130 entities in 14 countries controlled by R. Allen Stanford. According to the SEC, the companies' core objective was to sell certificates of deposit ("CD"s) issued by Stanford International Bank Limited in Antigua ("Stanford Bank"). Stanford achieved and maintained a high volume of CD sales by promising above-market returns and falsely assuring investors that the CDs were backed by safe, liquid investments. For almost 15 years, the Bank represented that it consistently earned high returns on its investment of CD sales proceeds, ranging from 12.7% in 2007 to 13.93% in 1994. In fact, however, the Bank had to use new CD sales proceeds to make interest and redemption payments on pre-existing CDs, because it did not have sufficient assets, reserves and investments to cover its liabilities.

The SEC filed suit against R. Allen Stanford, the Stanford Bank, and related companies on February  [**5] 16, 2009. At the SEC's request, the district court issued a temporary order restraining the payment or expenditure of funds belonging to the Stanford parties. The district court also appointed Ralph S. Janvey as Receiver for the Stanford interests and granted him the power to conserve, hold, manage, and preserve the value of the receivership estate. On March 2, 2009, the district court issued a preliminary injunction prohibiting any disbursement of funds or securities in the name, on behalf of, or for the benefit of the Stanford entities.

As a result of the receivership order and the preliminary injunction, Stanford customers' investment accounts were frozen at the investment firms of Pershing, LLC, JP Morgan Clearing Corp., and SEI Private Trust Company. On March 27, 2009, the district court adopted procedures for the Receiver's review and release of any accounts that did not include proceeds from Stanford CDs. By late June, 97% of the investor accounts had been released from the freeze order. On June 29, 2009, the district court ordered the Receiver to complete his account review process within five weeks. The court specified that the freeze of all remaining accounts would expire  [**6] at noon on August 3 unless the Receiver asserted claims against the account owners and obtained injunctive relief pending those claims.

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588 F.3d 831 *; 2009 U.S. App. LEXIS 25013 **

RALPH S. JANVEY, Plaintiff -- Appellant -- Cross-Appellee v. GAINES D. ADAMS ET AL., Defendants -- Appellees -- Cross-Appellants, JAMES R. ALGUIRE ET AL., Defendants -- Appellees; RALPH S. JANVEY, in His Capacity as Court-Appointed Receiver, Plaintiff -- Appellant v. JIM LETSOS ET AL., Defendants -- Appellees

Subsequent History: Dismissed by, in part, Motion denied by, in part Janvey v. Alguire, 2010 U.S. Dist. LEXIS 147176 (N.D. Tex., June 24, 2010)

Decision reached on appeal by, Remanded by Janvey v. Alguire, 628 F.3d 164, 2010 U.S. App. LEXIS 25526 (5th Cir. Tex., Dec. 15, 2010)

Prior History:  [**1] Appeal from the United States District Court for the Northern District of Texas.

SEC v. Stanford Int'l Bank, Ltd., 2009 U.S. Dist. LEXIS 73074 (N.D. Tex., Apr. 17, 2009)

CORE TERMS

Investor, funds, nominal defendant, district court, proceeds, freeze, ownership, receivership, injunction

Civil Procedure, Parties, Capacity of Parties, General Overview