Toronto-Dominion Bank, commonly known as TD Bank, has agreed to pay $1.2 billion to settle a lawsuit accusing the bank of being involved in a notorious Ponzi scheme orchestrated by disgraced financier Allen Stanford over a decade ago. The settlement, announced on Monday, involves TD Bank paying $1.205 billion to a court-appointed receiver who will distribute the funds to the victims of the scheme. Despite the settlement, TD Bank maintains its innocence and denies any wrongdoing in connection with the multi-year Ponzi scheme operated by Stanford.
Allen Stanford, who was convicted in 2012 on 13 counts of fraud-related charges, was found guilty of orchestrating a massive fraud scheme through Stanford International Bank Ltd., an offshore bank in Antigua. Prosecutors alleged that Stanford sold fraudulent certificates of deposit worth billions of dollars, ensnaring thousands of victims. The lawsuit against TD Bank claimed that the bank collected these deposits in US and Canadian currencies and ignored warning signs regarding the Antigua-based bank’s activities over the years.
In its statement, TD Bank emphasized its denial of liability or any wrongdoing related to Stanford’s Ponzi scheme. The bank stated that it provided primarily correspondent banking services to Stanford International Bank Limited and asserts that it acted properly throughout the entire duration of the scheme.
The settlement announcement comes on the same day when the banks involved were scheduled for trial in a federal court in Houston, effectively avoiding a lengthy legal proceeding. Alongside TD Bank, HSBC will pay $40 million, and Independent Bank (formerly Bank of Houston) will pay $100 million, as confirmed by the receiver’s counsel. HSBC expressed satisfaction with resolving the claim without admitting liability or any wrongdoing, while Independent Bank has not yet responded to the request for comment but denied any liability or wrongdoing in a securities filing.
Investors alleged that five banks, including Trustmark, TD Bank, Bank of Houston (now Independent Bank Group), HSBC, and Societe Generale Private Banking, knew or should have known about Stanford’s fraudulent activities and assisted him in his 20-year scheme. The recent settlement brings the total amount of recoveries to more than $1.6 billion.
Kevin Sadler, lead counsel for the receiver, described the settlement as a monumental recovery, considering the challenges faced since 2009. TD Bank stated that it agreed to settle in order to avoid the distractions and uncertainties of an extended legal proceeding.
Clients of Stanford were misled with promises of higher returns on the certificates of deposit they purchased, falsely claiming rates 3-4% higher than US CDs, and assurances of safe investments in stocks and bonds. However, the money was used to fund Stanford’s extravagant lifestyle, including multiple luxurious properties in the Caribbean and the US.
In related settlements earlier this year, Societe Generale reached a $157 million agreement, while Trustmark agreed to pay $100 million, contributing to the overall recoveries from the Ponzi scheme.