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Arbitration Ruling Saves Pershing LLC $80 Million in Ponzi Scheme Lawsuit

Wednesday, November, 12, 2014

85 investors suing Pershing LLC for $80 million in losses stemming from Allen Stanford’s Ponzi scheme cannot collect, per a ruling made by the arbitration board hearing the case.  The plaintiffs all lost their retirement savings in a complex scheme run by Stanford involving Certificates of Deposit.  The plaintiffs claimed Pershing should have known that Stanford’s scheme was fraudulent and protected them.  They claim Pershing did not perform due diligence and actively assisted Stanford with his fraud.


Stanford is currently serving a 110-year jail term for his fraud.  The U.S. Supreme Court ruled this year that victims of Stanford’s scheme can in fact sue “secondary actors” such as law firms and financial advisors who knowingly or unknowingly assisted with the fraud’s spread.


However, the investors were compelled through their agreement with Pershing to pursue redress through the Financial Industry Regulatory Authority (FINRA)’s arbitration board.  The board rejected these claims and ruled that Pershing was not responsible for these losses.  FINRA arbitration boards never give out reasons for their decisions.


No appeals are possible in FINRA arbitrations, but the investors have one last card to play.  They can attempt to have the arbitration decision vacated and re-heard, which can sometimes result in a changed decisions depending on the makeup of the three-person FINRA panel.  However, there are no guarantees that this would even be possible to achieve, or that a new panel would change the existing ruling as it stands