A federal judge in Florida has thrown out a lawsuit accusing the US Securities and Exchange Commission of negligence for failing to report that the now-imprisoned swindler Allen Stanford was running a $7.2 billion (€5.4 billion) Ponzi scheme.

US district judge Robert Scola said the market regulator was shielded under an exception to the Federal Tort Claims Act that bars claims arising from misrepresentation or deceit.

The plaintiffs, Carlos Zelaya and George Glantz, said they lost a combined $1.65 million with Stanford, and sought class-action status on behalf of investors who were victims of his fraud. They plan to appeal the decision, their lawyer, Gaytri Kachroo, said. SEC spokesman Kevin Callahan declined to comment.

Stanford (63) is serving a 110-year prison sentence after he was convicted on criminal charges in March 2012 for a fraud that the government said was centred in certificates of deposit issued by his Antigua-based Stanford International Bank.

Mr Zelaya and Mr Glantz claimed that the SEC considered Stanford’s business a fraud after each of four examinations between 1997 and 2004, but failed to advise the Securities Investor Protection Corp, which compensates victims of failed brokerages.

The SEC filed civil charges against Stanford in 2009. – (Reuters)