Whistleblower Alleges $8 Billion Fraud At Sir Allen Stanford’s Offshore Bank


This will be interesting to watch: A whistleblower named Alex Dalmady claims that Stanford International Bank, a large offshore operation run by Texas billionaire Sir Allen Stanford, is an $8 billion fraud, with suspiciously steady year-on-year returns, a la Bernie Madoff. We’ve embedded the full document below, but here’s Felix Salmon’s boildown:

As you can see, Stanford manages to report extremely consistent returns every year, and it even managed to make a 6% profit on its portfolio in 2008. Which is extremely impressive, given what happened to just about every asset class last year. And which is even more impressive given that Stanford International Bank is a bank which doesn’t make loans.

SIB, it turns out, is a very peculiar fish indeed: it offers extremely high interest rates on its deposits — on the order of 7.5% for a one-year CD. It then takes that money and, rather than lending it out at a higher rate still, invests it in stocks and hedge funds and commodities and the like.

If that sounds dangerous to you, ask yourself whether you’d be remotely reassured by the “Depositor Security” section of Stanford’s website:

SIB has seen consistent profitability and growth every year since the Bank was founded. After first paying its clients a premium return on their deposits and then rewarding employees for their performance, the Bank has reinvested every dollar earned back into retained earnings. This has continuously strengthened SIB’s capital base for future growth and is a significant difference between SIB and other international banks.

Basically, this is Allen Stanford — the bank’s sole shareholder — saying “I’m a billionaire, I’m good for the money”.

We’ll be following this more, particularly as it’s the first test of the lone, internet-based whistleblower in the post-Markopolos era.



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