ST. JOHN'S, Antigua (AP) Regulators in the Caribbean took over Antiguan banks owned by Texas financier R. Allen Stanford on Friday, hoping to contain damage to the local economy as U.S. investigators explore an alleged fraud scheme involving billions of dollars.

The Bank of Antigua suffered a run on deposits, even though it has not been named in the fraud complaint by the U.S. Securities and Exchange Commission. A failure of the local bank could have severe consequences in the twin-island nation of Antigua and Barbuda, the Eastern Caribbean Central Bank said in explaining its intervention.

The SEC complaint filed Tuesday focuses on the billionaire's offshore bank, Stanford International Bank Ltd., where an estimated $8 billion is now being controlled by a team of accountants working for Vantis Business Recovery Services. Antigua's banking regulatory commission said it appointed the British firm as receiver to protect "the reputation and integrity" of its banking sector.

Private international banking has been used worldwide to protect assets from economic crisis, hyperinflation, political instability and high taxes. Such "cross border assets" reached $4.6 trillion in June 1999, with $900 billion, or 20 percent, stored offshore in some 13 Caribbean island nations, according to the most recent data available from the International Monetary Fund.

U.S. authorities allege that Stanford lured these clients by promising unrealistic returns on certificates of deposit and other investments. And offshore banking experts say he chose an ideal headquarters an island where he could acquire power, prestige and even a knighthood to help win investors' confidence while keeping enforcement agencies at bay.

While these clients' life savings are now at risk, experts say red flags were clearly flying in Antigua, one of the world's least-regulated and least-transparent banking havens.

"In the offshore world, you have a hierarchy and Antigua is at the bottom," said David Marchant, an offshore banking analyst based in Miami, Florida. "Antigua was the wild west and Stanford was the chief cowboy."

Stanford was warmly welcomed in 1990 as Antiguan politicians sought to diversify their tourism-dependent economy. Before long, he acquired dual Antiguan citizenship, became the largest private employer and developed a level of influence over local regulators that worried U.S. watchdogs.

Stanford also has had considerable influence in Washington, where his campaign donations, mostly to Democrats, reached a peak as efforts to strengthen financial regulations died in the Senate.

As the SEC and FBI pursue civil and criminal probes of Stanford's vast holdings, jobs are in jeopardy across Antigua, an island of some 80,000 people where rolling green hills are dotted with palm trees and the occasional stone foundations of old windmills from when sugar plantations were the main business of the former British colony.

Stanford's Antigua enterprises include a newspaper, two restaurants, a development company and the ornately landscaped Stanford cricket grounds, where he shook up the staid world of professional cricket last year by bankrolling the purse in a $20 million winner-take-all match.

Foreign investors who went to Stanford's white-columned international bank near the airport Friday in hopes of getting cash came away instead with a flier informing them about the bank's new receivers. But some depositors were standing by Stanford as a man who has done many good things for Antigua.

Sandra Cox, a 42-year-old jewelry store employee, said she doesn't believe the allegations and won't withdraw her money.

"You get somewhere in life and they always try to bring you down," she said. "I can't see him doing something like that."

Prime Minister Baldwin Spencer, whose party came to power in 2004, defends Antigua's banking rules and credits Stanford for creating some 2,000 jobs, but says his predecessors allowed him to acquire "dangerous" influence and prime real estate.

"We can't allow the patrimony of our country to be taken over by any one individual," Spencer said after a raucous political rally Wednesday for his United Progressive Party, which hopes to retain power in March 12 elections.

Spencer says his opponents sought to "literally give away Antigua and Barbuda to Allen Stanford."

Former Prime Minister Lester Bird, a close Stanford ally, denies that his party did the billionaire's bidding. And current leaders of the Antigua Labor Party, which ruled when Stanford brought his offshore bank from Montserrat in 1990, note that Stanford has not been charged with any crimes.

"His contributions to this country are immeasurable," said parliament member Steadroy "Cutie" Benjamin. "What's happening to him is unfortunate."

Still, experts say Antigua's lax regulations make it vulnerable to fraud, money laundering and other crimes.

"Why did this foreign money go there in the first place? You have to offer something they can't get at home and Antigua offered no regulation. That appeals to tax evaders or anyone involved in illegal activity looking to park their money offshore somewhere," said Marchant, who publishes the OffshoreAlert newsletter. "In their greedy desire to avoid paying a 15 to 20 percent tax, they put their money with an offshore crook who ultimately taxed them 100 percent."

Stanford's influence worried the U.S. State Department in the 1990s, said Jonathan Winer, a former deputy assistant secretary of state for International Narcotics and Law Enforcement. "We thought the situation was utterly bizarre and inappropriate and we told the Antiguan government that," he said.

Antigua's banking industry was put on a watch list in April 1999, but later removed after the government adopted what the U.S. considered to be sufficient anti-corruption and banking regulations.

"There is a legitimate offshore world," Marchant said, but this world also "appeals to tax evaders or anyone involved in illegal activity."

The U.S. has sought to boost money-tracking efforts in response to terrorism, and oversight in many places has improved. But Antigua is still known as one of the worst, said former U.S. federal prosecutor Ellen Zimiles.

"I imagine for Antigua, they were very happy to have him there," she said. "Or at least they thought they were, and now there's a very high price to pay."

Associated Press writers Theresa Bradley in Mexico City and Frank Bajak in Bogota, Colombia contributed to this report.

Copyright 2009 The Associated Press.