Abstract

The case study examines the massive 'Ponzi Scheme' run by Allen Stanford (Allen), one time honored with the 'Sir' title by the Antigua government and ranked the 239th richest person in America by Forbes. Stanford was famous for his philanthropy and luxurious life style before he was caught by federal agents in February 2009 just a few weeks after an article published in VenEconomy Monthly written by Alex Dalmady. This article had raised, for the first time in 13 years (1996-2009), some very basic questions about the financials of Stanford International Bank (SIB), one of the companies run by Stanford Later, the Securities and Exchange Commission (SEC) alleged in its complaint to the US District Court for the Northern District of Texas, Dallas Division that Stanford and his group had sold more than US$ 7.2 billion of self styled very high interest bearing 'Certificate of Deposits' (CDs) by touting that the bank was safe and strong. The bank had continuously earned double digit returns on its investment portfolio since 1992. However, experts raised questions on the functionality of the SEC which had had some suspicions about Stanford but did not take any serious action against him and his companies before the scam broke out in 2009.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand the events which led to the exposure of 13-year-old financial scandal
• Analyze how the scam was carried out
• Analyze the impact of fraud on the economy of US
• Analyze the need for overhauling SEC functionality
• Examine the need for overhauling the architecture of international investment

Keywords

Financial Scam, Ponzi Scheme, Certificate of Deposits, Allen Stanford, Stanford Financial Group, Securities and Exchange Commission, Bernard Madoff, Stanford International Bank