By: Jack WaymirecloseAuthor: Jack Waymire Name: Jack Waymire
Email: jack@paladinregistry.com
Site: http://paladinregistry.com
About: Jack writes for the InvestorWatchdog website and Worth magazine. He worked in the financial services industry from 1976 to 2004. For twenty of those years he was the president of a Registered Investment Advisory firm and a Broker/Dealer. Jack is the author of Who's Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor and is a co-founder of PaladinRegistry.com.See Authors Posts (87) | August 27, 2009 | Illegal Schemes & Scams, Ponzi Schemes

As follow-up to a previous blog post James Davis, the former Chief Financial Officer at Stanford Financial Group, pleaded guilty to investment fraud and obstruction of justice charges. Davis said he and his co-conspirators defrauded thousands of investors when they sold them $7 billion of CDs that were issued by the Antiqua-based Stanford International Bank. He said the scam went back to the 1990’s when they began making false entries into the bank’s ledgers about its revenues and account balances.

Investors bought the CDs believing they would receive high returns for low risk – a classic Ponzi sales tactic. They probably felt safe because they bought the investment products from a high profile company that appeared to be very successful – another important tactic for most scams.

The company also had a flamboyant founder, Allen Stanford, who paid Vijay Singh (a well known golfer) $8 million to wear the company name and logo and committed huge sums of money to becoming a dominant force in the game of cricket. Huge egos are also a characteristic of many investment scams because the perpetrators believe they are smarter than everyone else so their scams will not be exposed.

I wonder if anyone questioned how Allen Stanford could afford to sponsor athletes and teams selling CDs that supposedly paid high returns?