The SEC Bungles Stanford Financial Investigation

standford financial building - sec logoTo the surprise of absolutely nobody, the SEC bungled their handling of yet another multi-billion dollar fraud.

First it was Bernard Madoff and Madoff Securities. Despite having this case handed to them on a silver platter by Harry Markopolos, the SEC didn't take action against Madoff and his fraud swelled to many tens of billions of dollars. Markopolos led the SEC by the hand on the case, even interviewing with SEC officials and presenting them with a document that laid out the case against Madoff, red flag by red flag.

Now (surprise, surprise), media reports are revealing that the SEC missed "numerous" red flags on Stanford Financial.

Here are some of the "red flags" that a recent article by the Associated Press revealed:

-a 2006 lawsuit was filed against Stanford Financial, alleging that the company was in fact one massive Ponzi scheme

-the firm that audited them was miniscule and nobody had ever heard of them

-regulators found that the company "lacked enough capital to function properly as a securities firm" in June of 2007. Stanford simply paid a $20,000 fine and continued with business as usual

-the company was investigated and inspected by both the SEC and NASD starting in 2004. They were found guilty of multiple infractions, but got off just paying fines that totaled $70,000

The SEC revealed recently that it began investigating Stanford in October of 2006 but was asked for an "unidentified" federal agency to suspend its inquiry.

Who asked the SEC to suspend their inquiry, and why?

Who has the authority to tell the SEC to back off of an investigation? The FBI? Why wouldn't they run their investigation in co-operation with the SEC if this were the case?

Another question - how many of these multi-billion dollar Ponzi schemes are currently operating right now? How many have been able to avoid detection up until this point?

Remember - during his testimony in front of Congress, Harry Markopolos revealed that he would be handing over information on a couple of new suspected "Ponzi" schemes to government officials.

How many are out there?

How many have already been "investigated" by the SEC, and are still in operation?

While we are asking questions - what is going to be done about the SEC and their extreme ineptitude when it comes to investigating multi-billion dollar frauds?

I mean, this is getting absolutely ridiculous.

Filed under: Stock Market Scandals

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