Allen Stanford

As a cricket supporter I would like to change my tune today and talk about someone who has played a major role in cricket in the last few years. Late 2008 in Antigua, England played the West Indies in a T20 match with the winning side collecting a cool $20 million for their troubles. The losing side went home, that's it they went home with nothing. It is now history that the West Indies won comfortably by 10 wickets and pocketed the $20 million.

Allen Stanford was the man behind this game. He had been living in the West Indies for a number of years and had grown attached the sport that is cricket. He had planned to organize five of these games with $20 million on the line for each game. Unfortunately for cricket fans and especially the England and West Indies teams only one of these games were ever played as the following year Sir Allen Stanford was arrested on suspicion of been the front man in a fraud of massive proportions called a Ponzi scheme.

I'm not here to pass judgment on whether or not Stanford is guilty or not, in fact I'm kind of hoping that he isn't as I enjoyed the first game they played and would like to see it continue, as even though the West Indies won convincingly it was still quite exciting, especially with the amount of money at stake and the fact that some of the young players in the Caribbean side were about to become instant millionaires.

So, what is a Ponzi scheme that Stanford has been accused of? Basically a Ponzi scheme is an "investment" in which investors are paid returns from other investor's money or even from their own money. There is actually no profit earned by the people running the show. Naturally for the scheme to be kept going you need an endless supply of investor's money. This can be done when the investor re-invests his or her money because understandably they are happy with the results.

So how do these schemes get found out? Well they get found out one of three ways:

1. The people behind the scheme disappear.
2. The scheme can collapse when the returns are so good that the people behind it have problems paying the      returns and everything turns to custard.
3. The whole scheme gets exposed by a whistle blower or external market forces.

What is the moral of the story? If it is too good to be true, it probably is or do your own due diligence before making an investment.