Read SEC charges against Stanford

Allen Stanford, the billionaire cricket sponsor, lost money with the alleged $50 billion swindler Bernard Madoff but lied to his investors that he had not, say regulators.

The US Securities and Exchange Commission (SEC) lodged 25 pages of allegations with a court in Detroit yesterday, detailing a $9.2 billion fraud allegedly perpetrated by Mr Stanford and three companies he controls.

"Perhaps the most alarming is that Stanford Investment Bank has exposure to losses from the Madoff fraud scheme despite the bank's public assurance to the contrary," said the SEC.

"Stanford Group Company has failed to disclose material facts to its advisory clients."

The SEC said that an analyst told Mr Stanford and his inner circle in December that SIB had lost about £400,000 in Mr Madoff's alleged Ponzi scheme, which involved paying returns to investors out of the capital invested by lother clients. But in a report to Stanford investors the same month, the bank said it "had no direct or indirect exposure to any of Madoff's investments".

Mr Stanford is the chairman and sole shareholder of SIB, a private offshore bank, and also sole director of its parent company Stanford Group. He refused to appear or give evidence to the SEC investigation.

News of the charges is a stunning blow for the England and Wales Cricket Board and its chairman, Giles Clarke, who signed a controversial, five-year sponsorship deal worth $100 million (about £70.2 million) with Mr Stanford in a glitzy ceremony at Lord's last summer.

The SEC's inquiry into the improbably high rates of return on SIB's investment products had been running since last July, but according to Bloomberg news agency the turning point came last week, when a lawyer for SIB informed the SEC that he wanted to withdraw all the evidence he had given so far.

"The attorney's withdrawal is a massive red flag that screams fraud," said Peter Henning, who teaches criminal and securities law at Wayne State University in Detroit.

"If the SEC hadn't turned up the heat by that point, it did then."

Bloomberg said that a source familiar with the case named the lawyer as Thomas Sjoblom , of Proskauer Rose LLP. Mr Sjoblom is an expert in financial fraud who worked for the SEC for 20 years before joining Proskauer Rose in 1999.

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