Billionaire Allen Stanford Found in Virginia

The manhunt is over. The missing billlionaire R. Allen Stanford has been found in Virginia. The SEC has been investigating him for fraud.

This is a good time to revisit my “Seven Red Flags” on avoiding investment scams. Here’s a sample of what I wrote:

“Red Flag #1: It’s Too Good to Be True: Be very wary of unusually steady returns. Remember that the people behind Ponzi schemes are masters of human conditioning. If the returns are consistently strong and there’s little or no volatility, you can probably be sure that the returns are truly “too good to be true.”

Red Flag #2: Your Manager Wants Your Money: Never, never, never give money directly to an investment manager! In the securities businesses, manager’s never take custody. Instead, they use independent banks or brokers. These are the folks who provide monthly statements and transparency, as well as gobs of account insurance. Technically, Madoff operated as his own broker-dealer and faked his account statements. Most banks and brokerages carry supplemental insurance, often $20 million to $100 million per account upon request. The bottom line is, never be afraid to ask.”

You can read the whole thing here, How to Avoid Getting Madoffed.

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