How Billionaire Allen Stanford Lost His Fortune
Some billionaires lose all their money because they stupidly assumed it would always be there and they could continue to spend a million dollars a month until, like some kind of economic Icarus flying too close to the sun on waxen wings, they came crashing down into the labyrinth of bankruptcy and ruin. We can almost feel sorry for billionaires who lost their entire fortunes this way. Almost. Well, not really. It's hard to have sympathy for someone who can spend hundreds of thousands of dollars on clothing.
But there's another class of billionaire who will surely never get a drop of our sympathy, and that's the kind who makes his fortune from years of stealing other people's life savings, and then loses his bundle. Such is the case with Allen Stanford. The native Texan with an ego as big as his home state is now serving out what may as well be a life sentence (110 years) in a Florida prison for defrauding investors to the tune of billions — according to Investopedia, $7 billion, to be exact. The brawny, mustachioed fraudster went from hopping around Texas in his helicopter to visit his various extramarital girlfriends, being knighted on a Caribbean island, and living in a moat-protected castle in Florida to losing every ill-gotten penny he had and rotting away in prison. In 2102, he was found guilty of conducting one of the largest Ponzi schemes in U.S. financial history, second only to that of notorious swindler Bernie Madoff.
Allen Stanford was once one of the richest men in America
A 2009 Vanity Fair exposé of Stanford described him at the beginning of his career as "a classic Texas archetype: the swashbuckling entrepreneur, with a big smile, a roving eye, and a laserlike focus on making money." Stanford got his first taste of moneymaking by running a successful chain of gyms in Waco and other Texas cities in the 1970s, but when falling oil prices in the early '80s showed the state exactly what the bust part of the boom-and-bust economic cycle looks like, he found himself bankrupt, over $13 million in debt and with a not insignificant number of creditors quite unhappy with him. He tried to open a burger joint in a town near Waco, where a former gym employee spotted him flipping patties, but that business soon went belly-up like the others.
So what does a ruined hot-shot businessman do when he loses two business, goes broke, and has dozens of (most likely gun-owning) Texans on his trail? He runs off to the Caribbean to open a bank on an island with little to no financial regulation, of course. He began by seeking wealthy Latin American investors who were looking for financial security, due to the instability of their home governments. According to CNBC, he made a smooth $350 million in a single year, then made his move on the U.S. market by establishing the Houston, Texas-based Stanford Financial Group in 1992.
Allen Stanford committed 'economic homicide'
Stanford defrauded his investors by selling them phony certificates of deposit (CDs). Normally one of the safest investment products on the market, Stanford's CDs were anything but. Drawn in by his promises of ridiculously high returns, however, 50,000 people deposited their money in his phantom bank, lining his pockets with billions of ill-gotten dollars. He used the money to fund his lavish lifestyle, buying multiple jets and a helicopter. He became the world's number one promoter of cricket, offering a $20 million prize for a match, the largest ever awarded for a team sporting event. After a year of living in a 57-room castle complete with a tower and a moat, he got bored with the place, so he had it torn to the ground.
Meanwhile, his defrauded investors couldn't pay their medical bills. As many as 18,000 of them have yet to recover the money he stole from them. Cassie Wilkinson, who lost hundreds of thousands of dollars to Stanford, called the scheme "economic homicide" for the devastation it brought on her and her husband. "Someone murdered the life that I knew, that I worked hard for," she told CNBC. "We were not born with money; we earned every single penny." Sandra Dorrell, a single mother struggling to treat a rare medical condition, lost over a million dollars in the scheme. For these and the thousands of other lives he ruined, Stanford definitely deserves to spend a life or two rotting away in prison.