Alex Dalmady has an admirably clear explanation of how the financial empire of Allen Stanford crumbled into nothingness.
Basically, they were booking false profits into what they called Tier 3 and hoping a market surge would allow them to pay back investors. This may actually have worked during surging stock market years, but when the crash came, followed by Madoff’s arrest, the withdrawals increased and soon there was nothing left.
you should understand what Tier 3 contained: a few little somethings that were awful investments, some “anythings” that were definitely ill-advised, but mainly…a whole lot of “nothing”. But definitely NOT what was advertised in the financial statements.
It didn’t start as a ponzi. It was probably never really meant to be a ponzi, but it became one for all practical purposes.