How Allen Stanford Stole $7.2 Billion (& Got Away With It For 17 Years) — Transcript

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1. 0:00you've probably heard about the wolf of
2. 0:01wall street the stock market fraudster
3. 0:03that made millions pumping and dumping
4. 0:05penny stocks during his time in the
5. 0:07business the wolf of wall street managed
6. 0:09to steal a whopping 200 million dollars
7. 0:12while that's a terrible figure when you
8. 0:14take a look at alan stanford's fraud the
9. 0:16wolf of wall street looks like a rookie
10. 0:18allen ran a ponzi scheme for nearly 20
11. 0:20years and defaulted a total of 7.2
12. 0:23billion dollars which is the second
13. 0:25largest in history
14. 0:27so here's how allen stole 7.2 billion
15. 0:29dollars and then nearly got away with it
16. 0:33taking a look back alan stanford was
17. 0:35born on march 24 1950 in mexia texas
18. 0:39his father james stanford was actually a
19. 0:41former mayor of mexia and his mother was
20. 0:44a nurse it seems like allen performed
21. 0:46pretty well academically he graduated
22. 0:48from eastern hills high school and
23. 0:50attended baylor university where he
24. 0:52earned a finance degree in 1974
25. 0:54while at baylor allen lived with a man
26. 0:56named james davis who would eventually
27. 0:59become allen's right-hand man in the
28. 1:00ponzi scheme
29. 1:01anyway after graduation allen decided to
30. 1:04take a shot at legitimate
31. 1:05entrepreneurship his father had a pretty
32. 1:08good reputation in the town and this was
33. 1:10during the crazy inflation crisis of the
34. 1:111970s so banks were desperate to loan
35. 1:14out as much money as possible to combat
36. 1:16high inflation
37. 1:17this made it pretty easy for alan to
38. 1:19borrow a large amount of money and open
39. 1:21a string of gyms according to allen's
40. 1:23workout buddies allen wasn't extremely
41. 1:25tall and muscular man coming in at 6
42. 1:27feet 5 inches and 330 pounds so you
43. 1:31would think that running a gym would be
44. 1:32right up his alley but this wasn't the
45. 1:34case
46. 1:35allen ran these gyms for several years
47. 1:38but in 1982 he was forced to close them
48. 1:40down after racking up 13 million dollars
49. 1:42in personal debt despite this massive
50. 1:45loss allen would start a real estate
51. 1:46business with his father
52. 1:48this was actually great timing as the
53. 1:50texas real estate market was getting
54. 1:52crushed
55. 1:53throughout the 1970s oil prices had
56. 1:55skyrocketed due to the inflation crisis
57. 1:58but as inflation slowed down in the
58. 1:591980s oil got crushed given that the
59. 2:02texan economy was quite dependent on oil
60. 2:05the texan economy also got crushed which
61. 2:07of course includes real estate allen and
62. 2:09his father made a killing buying up real
63. 2:11estate at the bottom and flipping it as
64. 2:13the market recovered this was honestly a
65. 2:15great business and i think allen should
66. 2:17have just talked to real estate the
67. 2:19company was growing rapidly and was able
68. 2:21to support 500 employees but things
69. 2:24would start getting shady as ellen
70. 2:26started making serious money in the
71. 2:281980s allen moved to the caribbean
72. 2:30islands presumably to reduce his tax
73. 2:31load allen first settled on the british
74. 2:34islands of monserrat in 1985
75. 2:36but the british started cracking down on
76. 2:38monster route residents around the same
77. 2:39time so alan jumped over to the island
78. 2:42of antigua
79. 2:43at this point allen might have been
80. 2:44using some tax loopholes and though
81. 2:46that's morally wrong it's not illegal
82. 2:49but it didn't take long for alan to jump
83. 2:51over the legal boundary as well
84. 2:53in 1991 allen founded a financial
85. 2:56institution called stanford
86. 2:57international bank in antigua and james
87. 2:59davis was appointed cfo
88. 3:02allen realized that many wealthy latin
89. 3:03americans were worried about their
90. 3:05corrupt governments collapsing and
91. 3:06taking other currencies with them so
92. 3:09they were looking for international
93. 3:10diversification opportunities and alan
94. 3:12leveraged this in order to really sell
95. 3:14the stability of his bank allen moved
96. 3:16the headquarters to houston texas and
97. 3:17associated himself with the american
98. 3:19dollar allen started selling
99. 3:21certificates of deposits or cds which
100. 3:23are basically just high-yield savings
101. 3:25accounts with terms the longer you agree
102. 3:27to keep your money in the account the
103. 3:28higher the annual interest rate allen
104. 3:30cds generally boasted returns that were
105. 3:32above average but this alone isn't
106. 3:35really a red flag here's the thing the
107. 3:37market average is dominated by the big
108. 3:39banks like chase wells fargo and
109. 3:41citigroup and these guys offer trash
110. 3:43interest rates chase bank for example
111. 3:46offers a whopping 0.05
112. 3:48return if you sign up for a 10-year cd
113. 3:52this isn't to say that chase isn't
114. 3:53generating great returns themselves
115. 3:55though in the second quarter of 2021
116. 3:57chase generated an roi of 8.16 percent
117. 4:00which is the highest it's been in the
118. 4:02last 15 years now of course interest
119. 4:05rates were much better in the 1990s but
120. 4:07the big banks and the market average are
121. 4:09always relatively low because they don't
122. 4:11need to offer competitive rates to
123. 4:13attract clients so it's quite common for
124. 4:15up-and-coming banks to offer attractive
125. 4:17rates to appeal to new customers
126. 4:19it seemed like stanford financial group
127. 4:20was just another going bank trying to
128. 4:22get ahead and i bet alan could have made
129. 4:24that the reality but he didn't instead
130. 4:28alan decided to make his cd business a
131. 4:30ponzi scheme the details of how exactly
132. 4:33allen pulled out the scam are not public
133. 4:34for obvious reasons the sec doesn't want
134. 4:37future criminals trying to replicate
135. 4:39alan's fraud but given that it was a
136. 4:41ponzi scheme i think it's safe to assume
137. 4:43that alan was using new deposits to pay
138. 4:45out the interest rates of old deposits
139. 4:47and given how fast his bank was growing
140. 4:50paying out all depositors with new
141. 4:51deposits wasn't that difficult just
142. 4:54three years after founding the company
143. 4:55the bank's assets had ballooned to 350
144. 4:58million dollars
145. 4:59allen maintained sizable operations in
146. 5:01antigua which quickly made him the
147. 5:02largest employer on the island by the
148. 5:04end of the 1990s stanford's total
149. 5:07deposits grew to 3 billion
150. 5:09meaning that allen was officially
151. 5:10defrauding in the billions but this was
152. 5:13just the beginning
153. 5:14moving on to the 2000s allen started
154. 5:16splurging with his depositor's money
155. 5:18allen spent 100 million dollars buying a
156. 5:20helicopter and a private jet and he
157. 5:22spent 12 million dollars to extend his
158. 5:24yacht by six feet
159. 5:25in 2006 allen became knighted by the
160. 5:28antiquing government which meant that he
161. 5:30could use the title sir similar to sir
162. 5:32richard branson
163. 5:33in the meantime allen was branching out
164. 5:35the business from latin american
165. 5:36customers to international customers and
166. 5:38growing the deposits exponentially
167. 5:40it might have been a better idea to keep
168. 5:41the bank relatively small so that it
169. 5:43would stay under the radar but once
170. 5:45again that's not what alan did
171. 5:48by 2008 the stanford group had investors
172. 5:50from 140 countries with a total of 50
173. 5:53billion under management this made allen
174. 5:55a multi-billionaire worth 2.2 billion
175. 5:58dollars
176. 5:59but things weren't so good under the
177. 6:01hood the sec and the fbi were starting
178. 6:03to get suspicious that the stanford
179. 6:05financial group was able to pay out
180. 6:06above average returns for 17 years
181. 6:09straight the sec had already been
182. 6:11suspicious about the group since 1997. a
183. 6:14lawsuit against the icc actually
184. 6:15suggested that the sec had looked into
185. 6:17the stanford group four times between
186. 6:191997 and 2008 and that they were acutely
187. 6:22aware of their fraud allen was running
188. 6:24they weren't aware of the size or depth
189. 6:26of the scheme but it looks like they did
190. 6:28know that something was off however they
191. 6:31didn't take any further action
192. 6:33when this case against the sec went to
193. 6:35court the sec spokesman john nestor took
194. 6:37the fifth and declined to comment so
195. 6:39maybe allen bribes some scc officials to
196. 6:42let him slide by or maybe the sec had
197. 6:44just been ignorant either way though
198. 6:47allen's luck was about to run out thanks
199. 6:49to the 2008 financial recession with
200. 6:51major institutions like lehman brothers
201. 6:53collapsing the sec and fbi decided that
202. 6:55it was time to crack down on all
203. 6:57financial institutions which of course
204. 6:59included the stanford financial group
205. 7:01once the sec and fbi started
206. 7:02investigating it it didn't take them
207. 7:04long to figure out that something was
208. 7:06seriously wrong with the institution
209. 7:08they simply started off by filing civil
210. 7:09charges against ellen though so they
211. 7:12clearly did not know the extent of the
212. 7:13fraud but soon enough they created a
213. 7:15warrant for his arrest alan heard about
214. 7:18this news and contacted a private jet
215. 7:19owner and tried to fly out of the
216. 7:21country
217. 7:22at this point allen's passport hadn't
218. 7:23been seized and allen wasn't convicted
219. 7:25of anything so the private jet owner
220. 7:28didn't have a problem with flying allen
221. 7:29out of the country however fate would
222. 7:32screw over allen the private jet company
223. 7:34only accepted wire transfers so allen
224. 7:37was unable to pay with his credit card
225. 7:39unable to flee the country the fbi would
226. 7:41arrest allen on june 18 2009 but this
227. 7:44was okay with alan as he had further
228. 7:46measures in place to protect his freedom
229. 7:48allen refused to admit his guilt and
230. 7:50maintain that he was completely innocent
231. 7:52at first this might sound a bit
232. 7:54confusing if he had defaulted investors
233. 7:57of seven billion dollars there was no
234. 7:59way he was going to get away with it at
235. 8:00this point so it would make way more
236. 8:02sense to just plead guilty right well
237. 8:06let's just say alan had some friends at
238. 8:07the sec
239. 8:09inspector general h david kotz was
240. 8:11assigned to investigate the case and i
241. 8:13don't know how he did it but somehow he
242. 8:15came out with a report in march of 2010
243. 8:18that the sec had dropped the ball on
244. 8:20stanford
245. 8:21the sec's chief investigator also felt
246. 8:23that this was super suspicious so he
247. 8:26brought in inspector general david c
248. 8:28williams to conduct an independent
249. 8:29review
250. 8:30over the next few years the sec and fbi
251. 8:32would uncover a total of 7.2 billion
252. 8:35worth of frauds the key to uncovering
253. 8:37all of this was allen's college buddy
254. 8:39and cfo james davis james basically
255. 8:42spilled the beans in exchange for a
256. 8:43reduced sentence james admitted that his
257. 8:45entire job was to just make up numbers
258. 8:48and that that's what he had been doing
259. 8:49since 1988. in the meantime allen wasn't
260. 8:53having a very pleasant time in jail as
261. 8:55one of his geomates would severely beat
262. 8:57him up
263. 8:58i'm not going to put up any pictures but
264. 9:00let's just say it wasn't pretty
265. 9:02anyway allen was sentenced to 110 years
266. 9:04in prison on june 14 2012 and he's been
267. 9:07rotting in prison ever since
268. 9:09he did file for an appeal but that was
269. 9:11eventually thrown out as for his partner
270. 9:14james davis he was only sentenced to
271. 9:16five years since he spilled the beans so
272. 9:18i think he should be out by now
273. 9:20unfortunately the same could not be said
274. 9:22about the investors that stand for
275. 9:24defrauded as most of them were never
276. 9:26able to get out of the hole that allen
277. 9:27put them in
278. 9:28many of stanford group's cd investors
279. 9:30lost every single penny they put in and
280. 9:32this has caused many to suggest that
281. 9:34ellen's fraud was even worse than bernie
282. 9:36madoff scam at least with bernie most
283. 9:38investors got a substantial portion of
284. 9:40their money back when everything was
285. 9:41said and done
286. 9:42but that's not the case with allen and
287. 9:45that's how alan stanford stole 7.2
288. 9:47billion dollars
289. 9:48what do you guys think about allen's
290. 9:50gmail to beating him up comment that
291. 9:51down below
292. 9:53also drop a like if you wish alan was
293. 9:55caught much earlier and of course
294. 9:57consider joining our discord community
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296. 10:00consider subscribing to see more
297. 10:01questions logically answered but until
298. 10:03then i'm ari and i'll see you guys on
299. 10:05the next one