DALLAS (Reuters) - A US court heard yesterday that the health of Allen Stanford's financial empire was worse than feared while Antigua and Barbuda's government moved to seize an island owned by the Texas billionaire accused of an $8 billion fraud.

The estate's final assets might only amount to hundreds of millions of dollars, not billions, said the lawyer appointed to run the Stanford Group Co and two other firms controlled by the businessman, who has a penchant for cricket and publicity.

"There is a liquidity crisis in this company," Ralph Janvey, the Stanford receiver, told US District Judge David Godbey in Dallas in his first public comments since taking over the Stanford companies in February.

After saying that the estate's final assets might only be a "fraction" of what he originally anticipated, the judge pressed Janvey to be more specific for the benefit of anxious investors.

That's when Janvey told the packed courtroom that it might only be "hundreds of millions of dollars, not billions". The US Securities and Exchange Commission has accused Stanford, his two top aides, chief financial officer Jim Davis and chief investment officer Laura Pendergest-Holt, and three of his companies of running a "massive Ponzi Scheme" and misappropriating at least $1.6 billion of investors' money.

In a Ponzi scheme, early investors are paid back with money from later investors.

Many of those investors will now be fretting after the picture Janvey painted in court and in a statement on his website.

"Based on our preliminary investigation, the liquidity situation and overall financial condition of the Stanford entities can only be described as dire," Janvey said in a statement.

Stanford, in addition to acquiring a Caribbean knighthood, has also amassed tens of millions of dollars in unpaid bills, according to the statement. Janvey's accounting team has been able to identify only a limited amount of cash on hand.

Janvey's task will be made more difficult by the complexity of the company, which is comprised of at least 175 entities in an number of countries, he said.

"Evidence is also mounting that the assets of the estate will be only a fraction of the amount needed to satisfy the anticipated claims against the estate," the statement said.

The woes of Stanford, who has maintained a low profile since the scandals exploded, included a move by Antigua and Barbuda's government to take control of an island that it discovered was owned by him.

Guiana Island, which Stanford controlled through a British Virgin Islands company whose shares he acquired, constitutes an additional 1,500 acres held by the US financier in the tiny Caribbean state at the heart of his business empire.

The fraud case has rocked Antigua and Barbuda, a twin-island state where the sports entrepreneur held businesses and properties and is the biggest private investor and employer.

Criminal charges have not yet been brought against Stanford but Pendergest-Holt, 35, was arrested on a US criminal obstruction charge last week.

At her bail hearing, an FBI agent testified that Janvey had so far recovered $90 million in Stanford assets and also found $160 million in a Credit Suisse account.