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The billionaire and a CD scam

By Sheyna Steiner · Bankrate.com
Wednesday, March 7, 2012
Posted: 11 am ET

The saga of R. Allen Stanford and his certificate of deposit Ponzi scheme is coming to a close -- at least one part of it, anyway: the trial and conviction. On Tuesday, a Texas jury found Stanford guilty of 13 out of 14 criminal charges including mail fraud, wire fraud, obstruction of an SEC proceeding and conspiracy to commit money laundering.

The defense argued that no CD buyers in Stanford's Ponzi scheme ever lost money until the SEC filed a civil suit against his company, according to the story "Jury finds R. Allen Stanford guilty on 13 of 14 criminal counts," from the Texas Lawyer website, Law.com.

Scardino told jurors that Stanford put together a financial empire over 25 years that employed 5,000 people and managed as much as $50 billion for investors. He argued that no one who purchased CDs from SIB lost money until the U.S. Securities and Exchange Commission filed a civil suit against Stanford and others and a judge appointed a receiver over SFG assets. "Every person who bought a certificate of deposit, until the receiver came in, was paid every penny of their money," Scardino told jurors.

Now, the same jury must decide how much of Stanford's remaining fortune will be forfeited to repay his victims. He has $300 million stashed in accounts in the U.K., Switzerland, Canada and Antigua, Bloomberg Businessweek reported in the story "Allen Stanford convicted in $7 billion investment fraud."

Though most are much more limited in scope, CD scams are more common than you would imagine. One of the best ways to avoid them is by only purchasing CDs issued by FDIC-insured institutions.

As long as the institution issuing the CD is a member of the FDIC, your deposit will be insured for up to $250,000 per depositor. You can verify that online by searching for the bank using the FDIC website.

For more on the pitfalls of buying foreign CDs, read Stanford case shows foreign CD risk.

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