Zelaya v. United States

The plaintiffs in this case, Carlos Zelaya and George Glantz, were victims of one of the largest Ponzi schemes in American history: the Ponzi scheme orchestrated by R. Allen Stanford. Plaintiffs were taken by surprise, yet, according to Plaintiffs, the federal agency entrusted with the duty of trying to prevent, or at least reveal, Ponzi schemes was not all that surprised. To the contrary, the United States Securities and Exchange Commission (“SEC”), had been alerted over a decade before that Stanford was likely running a Ponzi operation. According to Plaintiffs, notwithstanding its knowledge of Stanford’s likely nefarious dealings, the SEC dithered for twelve years, "content not to call out Stanford and protect future investors from his fraud." And though the SEC eventually took action in 2009, many people lost most of their investments. Pursuant to the Federal Tort Claims Act, Plaintiffs sued the United States in federal court, alleging that the SEC had acted negligently. The federal government moved to dismiss, arguing that it enjoyed sovereign immunity from the lawsuit. The district court agreed, and dismissed Plaintiffs’ case. Plaintiffs appealed that dismissal to the Eleventh Circuit Court of Appeals. In reviewing the district court’s dismissal, the Court reached no conclusions as to the SEC’s conduct, or whether the latter’s actions deserved Plaintiffs’ condemnation. The Court did, however, conclude that the United States was shielded from liability for the SEC’s alleged negligence in this case. The Court therefore affirmed the district court’s dismissal of the Plaintiffs’ complaint. View "Zelaya v. United States" on Justia Law