When the Securities and Exchange Commission sent probing questionnaires in 2005 to investors who’d bought certificates of deposit from Stanford Group, panic set in. “Then it all seemed to go away,” says one former Stanford employee. Concerns over jurisdiction stayed the SEC’s hand for almost 4 years, Bloomberg reports, while the alleged Ponzi scheme grew from $3.8 billion to $8.5 billion.
Stanford’s alleged scheme centered around CDs issued by a branch in Antigua. Not only is Antigua beyond the SEC’s usual reach, but CDs are typically overseen by bank regulators, not the SEC. The same territorial concerns also prevailed at Finra, the self-regulatory firm for brokerages. “Finra was just a bunch of robots,” said one former employee who accused Stanford of wrongdoing. “No one would look at our documents.”