Stanford Ponzi Scheme
In
1991 Allen Stanford founded the Stanford International Bank on the island of
Antigua. This was the beginning of
an 18-year, $7 billion Ponzi scheme that deceived tens of thousands of
investors. Within three years,
Stanford’s Bank had acquired $350 million in assets by targeting wealthy Latin
Americans that were worried about the stability of their own governments. The corruption was so deep between
Stanford’s bank and government officials that the chief banking regulator of
Antigua singed a blood pact with Stanford. Following the start of his scheme in Antigua, Stanford
returned home to Houston, Texas to form the Stanford Financial Group, where the
group would gain the trust of investors to put their money into certificate of deposits. The investments made into the deposits
were identified by the financiers in the group as offering rates of return of 3-4%
higher than those offered by the United States government. In less than a
decade, the group amassed $3 billion from the fake CDs, where Stanford himself
was taking the investments and using them for his personal ventures in
businesses and real estate. This led to Stanford living a lavish life well
beyond his means and he became a target of the SEC in the late 2000s, even though
they had been tipped off back in 1997 about his shady business practices.
In
2009 Stanford was arrested and sentenced in 2012 to 110 years in prison,
essentially lifetime imprisonment, for 13 counts of fraud, conspiracy to
launder money and conspiracy to obstruct justice. Currently, the frozen assets
in Canada, United Kingdom, and Switzerland are in the process of being freed up
after a settlement between receivers in Antigua and the United States. This
could lead to partial return of $300 million in assets, however, there is an
ongoing dispute involving the SEC because the U.S. receiver has yet to return
any of the invested money to the victims, while $100 million in fees has
already been accounted for. The hope is for around 90% of the assets to be
returned to the victims, understanding that tracing the money back and
compensating those who invested is an intricate puzzle to solve.
The Blackstone Group
The
Blackstone Group is one of the largest financial advisory and investment firms
in the world. The currently
preserve $210 billion in assets for public/corporate pension funds, academic,
cultural and charitable organizations, and much more. The group was founded in 1985 and they completed their IPO
in June 2007. Since 2007,
Blackstone stocks have been praised for its safety due to their diverse
portfolio of private equity, real estate, credit and hedge funds. Most recently, the Blackstone Group has
made a push to broaden their reach in the real estate market.
Currently,
Blackstone is the largest institutional investor in US housing. Since 2012, they have spent $3.5
billion to buy up 20,000 homes at depressed prices. Housing prices are 30% below their peak rights. This week they increased their credit
line to $2.1 billion. Their
current credit line is back by a syndicate of US banks led by Deutsche
Bank. Many investors believe that
Blackstone’s move into the housing market with this line of credit is very
risky. However, as you can see
from the graph below, the market disagrees. Blackstone stocks have been climbing over the past 3 months.
Many other
investors are making the move into the housing market like Blackstone. JP Morgan Chase estimated that market
for single-family homes is $1.5 trillion.
Only time will tell how the future of institutional investors in the
housing market and the risk that comes with it. Some have predicted the formation of secondary market of
securities to bundle home rentals in order to pass the risk on to the
investors.
The Market
The
Dow Jones has continued its upward climb to a 9th consecutive up
day. This is the best streak since
1996. Some people believe that we
are currently riding on a speculative like the mid 90s when Greenspan gave his
“irrational exuberance” speech.
Bernanke disagrees and has continued to make statement to build higher
confidence in the market.
Work Cited
·
žhttp://www.ft.com/cms/s/0/d96edbfc8bfb11e28fcf00144feabdc0.html
·
žhttp://www.ft.com/cms/s/0/e68700928b5311e2b1a400144feabdc0.html
·
žhttp://www.ft.com/cms/s/0/17793c5c-8bda-11e2-8fcf-00144feabdc0.html
·
žhttp://www.cnbc.com/49276842
·
žhttp://money.cnn.com/2013/03/13/investing/stocks-markets/index.html
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