Antigua-based billionaire Allen Stanford has been charged with fraud by US authorities according to the Reuters agency. The Securities and Exchange Commission (SEC) said that it was "alleging a fraud of shocking magnitude".
Linda Chatman Thomsen, director of the SEC's division of enforcement, said: "As we allege in our complaint, Stanford and the close circle of family and friends with whom he runs his businesses perpetrated a massive fraud based on false promises and fabricated historical return data to prey on investors. We are moving quickly and decisively in this enforcement action to stop this fraudulent conduct and preserve assets for investors."
Rose Romero, regional director of the SEC's Fort Worth regional office, added: "We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world."
A US district judge granted the SEC's request to impose a temporary restraining order on the Stanford operations and to freeze the defendants' assets, and appoint a receiver to marshal those assets.
Federal agents were also reported to have entered the Houston office of Stanford Financial Group, according to a Reuters eyewitness.
In Antigua, the country's prime minister, Baldwin Spencer, said the case had "profound, serious implications" for Antigua and Barbuda and its fallout threatens "catastrophic and immediate consequences". The government, he said, was putting in place a contingency plan and there was no need to panic.
Earlier on Tuesday the SEC had filed a complaint in federal court in Dallas accusing Stanford, the head of the Stanford Financial Group, of fraud in the sale of about US$8 billion of high-yielding certificates of deposit held in the firm's bank in Antigua. James M. Davis, a director and chief financial officer of Stanford Group, was also arrested.
The SEC said it could not account for the US$8 billion in assets that were housed in the Antigua bank after issuing subpoenas for bank records and to various witnesses. Most of those subpoenaed, including Davis and Stanford, failed to testify or produce documents relating to the assets. The group as a whole has 30,000 clients and investments totalling around US$50 billion.
The SEC went on to describe claims by the bank that it paid "significantly" higher returns on its CDs because of the high quality of its investments as "improbable, if not impossible".
The SEC's investigation into Stanford Financial Group comes at a time it is under considerable pressure inside the USA for its inaction regarding the multi-billion Bernard L. Madoff case.