The Wall Street Journal is reporting that federal prosecutors are investigating the possibility that phony knight Allen Stanford was running a ponzi scheme.
No details are available yet. A couple of quick points.
- It looks like this is moving into a criminal case. Earlier, it was the SEC investigating possible fraudulent disclosure issues. That would have most likely been a civil matter, as the SEC lacks jurisdiction to bring criminal cases. If the US attorney’s office is involved, the matter is probably being investigated as potentially criminal.
- The losses could be far worse than originally feared if Stanford really was running a ponzi, rather than just an investment firm that took on more risk than he let on.
UPDATE: The Journal now has a full story, although it doesn’t add much other than attributing the claim that prosecutors are investigating the case as a ponzi scheme to “people familiar with the investigation.”
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