Scam of the day – June 15, 2012 – Conviction of Allen Stanford – the lesson for everyone

Yesterday, R. Allen Stanford, the primary figure of the Stanford Financial Group was convicted of running a Ponzi scheme by which he stole 7 billion dollars through his Stanford International Bank based in Antigua.  He was sentenced to 110 years which sounds like a lot until you compare it to the 150 year prison term given to Bernie Madoff.  The difference is, of course, inconsequential, since it is unlikely that either man will ever see a day out of prison.  Stanford promised his investors that the were investing in safe Certificates of Deposit in his bank.  Despite the conservativeness of these investments, investors were promised double digit returns on their investments.  Unfortunately for the people who trusted Stanford, the entire investment scheme was nothing more than a Ponzi scheme where there were no profits and early investors were paid with the invested funds of later investors and ultimately there was nothing left.

TIPS

If it seems to good to be true, it generally is.  Conservative Certificates of Deposit do not and did not bring in the type of returns promised by Stanford and it was unreasonable to expect them to do so.  Investors should always investigate on their own the validity of any investment and never invest in anything that they do not understand.  Anyone investigating these investments carefully would have known that they could not sustain the returns promised.