(Adds comments from SIPC, Senator Vitter)
By Jonathan Stempel and Sarah N. Lynch
NEW YORK/WASHINGTON, Sept 5 (Reuters) - The U.S. Securities and Exchange Commission will not appeal a recent court decision that thousands of victims of financier Allen Stanford's Ponzi scheme were ineligible under federal law to file claims to recoup their losses, a SEC spokesman said on Friday.
On July 18, a federal appeals court in Washington rejected the SEC's bid to force the Securities Investor Protection Corp to start paying an estimated 7,800 former customers of Stanford Group Co.
The court concluded that those victims did not qualify as "customers" eligible for compensation by SIPC, which liquidates failed brokerages. It upheld a July 2012 ruling by a federal district judge.
Stanford, 64, is serving a 110-year prison term following his March 2012 conviction for running an estimated $7.2 billion fraud.
The scheme was centered on bilking investors with fraudulent certificates of deposit issued by his Antigua-based Stanford International Bank.
While the SIPC has handled other big liquidations, including that of Bernard Madoff's former firm, it contended that Stanford's customers did not qualify for help because the Antigua bank was not a member of SIPC, unlike Texas-based Stanford Group.
SEC spokesman John Nester said on Friday in an email that the regulatory agency decided "after very careful deliberation" not to pursue the case further.
He also said the SEC remained committed to Stanford's victims, and would work with the Stanford firm's receiver, the U.S. Department of Justice and others to maximize recoveries.
SIPC President Stephen Harbeck said in a statement that while his agency "has always had great sympathy for the people who purchased the certificates of deposit issued by the Stanford International Bank, the statute that SIPC administers does not address the losses of these victims."
Angela Shaw Kogutt, founder of the Stanford Victims Coalition, called the SEC decision "a complete injustice" to Stanford victims.
"Unfortunately, Stanford victims have no private right of action against SIPC," she said in an email. "The Commission has caved to an organization it is supposed to oversee."
Louisiana Republican Senator David Vitter, who has championed victims' effort to file claims in the case, said in a statement: "It's disappointing the SEC would just give up, but I'm going to make sure that they stay committed to helping the Stanford Ponzi scheme victims get compensated."
The case had been the first time the SEC had sued to force SIPC to start a court-supervised liquidation.
In ruling for SIPC, Circuit Judge Sri Srinivasan had written for the appeals court that "we fully agree" with the district court judge, who expressed that he had been "'truly sympathetic to the plight' of the victims." (Editing by Jonathan Oatis, Peter Cooney and Lisa Shumaker)