In the Madoff mould?

When the Texan financier Allen Stanford swept into English cricket in 2008, landing his helicopter at Lord's and wheeling a chest containing $20m in new banknotes in front of the cameras, traditionalists decried the debasement of the sport by the lure of filthy lucre. What they didn't know then, and what we are about to find out now, is whether Mr Stanford's lucre was indeed filthy.

This weekend, Mr Stanford's lawyers are furiously and reluctantly preparing for the trial that will decide if that $20m, and hundreds of millions or billions more, was the proceeds of a spectacular fraud.

In 14 criminal charges, he is accused of using his business on the Caribbean island of Antigua to perpetrate a $7bn pyramid scheme, an alleged fraud second in size only to that of Bernard Madoff. He was aided, prosecutors say, by a gang of associates who conjured fake investment returns from their imaginations, falsified documents and funnelled cash from Swiss bank accounts to fund his sports sponsorships and his extravagant lifestyle. In the trial's most eye-popping allegation, he is said to have sealed the co-operation of Antigua's chief bank regulator through a bizarre "blood brothers" ritual.

For 20 years, his indictment alleges, Mr Stanford and his co-conspirators solicited deposits from more than 20,000 people across the US and Central and South America and, "contrary to their representations to investors, they misappropriated a significant percentage of the proceeds ... to finance his personal, failing business ventures and for his own use and enjoyment, including personal living expenses, several yachts and private jet airplanes and numerous residences around the world".

"Yes," Mr Stanford had answered, smirking, in one television interview before his arrest, "it is fun being a billionaire – but it's hard work". Just how hard is dealt with in by court documents filed in Houston, which set out the lengths to which Mr Stanford is said to have gone to conceal his alleged fraud – as told to prosecutors by his right-hand man and one-time university roommate, Jim Davis.

"When the chief financial officer flips and agrees to testify for the prosecution, this is extremely bad" for a defendant, says Andrew Stoltmann, a securities attorney who has represented investors in cases against a string of banks and insurers. "Similar situations happened in the Enron trial and the Worldcom trial. Jurors tend to find their testimony to be very persuasive." Whether this will be the case here remains to be seen.

Mr Stanford built a network of testosterone-fuelled salesmen who touted his investment products, Mr Davis claims, in testimony that he will repeat in court during the six-week trial. This sales force hawked fabricated investment data that purported to show a miracle-grow investment strategy at work, while the company's founder creamed off several billion dollars as bogus loans. The $7.2bn Stanford International Bank (SIB) claimed to have built on behalf of its clients was in reality as little as $500m. The alleged co-conspirators at the top of the firm will be tried in the summer, separately, and it remains an open question whether Leroy King will be among them. Mr King is the main reason US regulators' investigations into SIB ran into the sand. He was chief executive of the Antiguan Regulatory Commission, a man the prosecution claims was bought and paid for by Mr Stanford. But Mr King has been fighting extradition from Antigua, saying local banking secrecy laws meant he could not assist US investigations. As part of his plea bargain, Mr Davis claims that Messrs Stanford and King took a "blood oath", sealed by cutting themselves and mingling their blood.

Mr Stanford entered a not guilty plea last week, and has argued before that if there was any illegal activity at his firm, it must have been the work of Mr Davis or his other underlings. His lawyers are also preparing to argue that the firm was solvent, properly investing its monies, and returning cash to anyone who asked – until the federal authorities swooped and destroyed the business.

The charges against Mr Stanford in 2009 caused a sensation. Panicked investors thronged his operations in Antigua, Caracas and Panama City, among other business centres, demanding their cash back. Those who had been lured by the too-good-to-be-true returns of his Antiguan certificates of deposit are still fighting to get back pennies on the dollar.

Mr Stanford's personal decline has been perhaps even more striking than his business losses. Barely three years ago, he was the brash Texan, famed for fathering six children with several women, pictured bouncing the wives and girlfriends of the England cricket team on his knee, and caring not a damn about the outrage he was causing. His $100m Twenty20 sponsorship had made him a giant in the sport.

But as civil and then criminal charges mounted, he appears to have lost his bearings. He was interviewed drunk and weeping on television, protesting his innocence. His fiancée, Andrea Stoelker, told The Independent the couple were "living on the charity of my family". In custody in Texas, he was beaten by fellow inmates so brutally that he sustained brain damage and, claim his lawyers, became addicted to painkillers.

The trial was delayed by a year, but Houston Judge David Hittner ruled this month that Mr Stanford was finally fit to face a jury. His lawyers were still begging to differ last week but they now say their client may even take the stand in his own defence next month.

What will be revealed if he does? Thousands of out-of-pocket investors want to know if they were duped and, if so, whether it was by a Walter Mitty character or a cold and calculating fraudster in the Madoff mould. The trial begins on Monday.

Dramatis personae: Key figures in the trial

The accused, Allen Stanford

The 61-year-old Texan turned his sleepy family finance firm into an offshore powerhouse that dominated Antigua and provided him with the life of a playboy. The England and Wales Cricket Board fawned as he promised to lavish $100m on Twenty20 cricket.

The betrayer, Jim Davis

Mr Stanford's university roommate and his right-hand man as he built his empire. Faced with the prospect of years in prison, Mr Davis, has turned evidence for the prosecution, alleging that the pair plotted to fabricate profits and lure investors.

The judge, David Hittner

Hittner has already declared he will brook no nonsense. He has banned lawyers from talking about the case outside the court, and had no truck last week with the idea Mr Stanford was unfit to face a jury.

The 'conspirator' Laura Pendergest-Holt

The first person to receive a criminal indictment in the case, she was in the front line with the federal authorities came to investigate the alleged pyramid scheme in 2009. She is charged with obstructing their inquires, as well as helping Mr Stanford dupe his sales staff into believing they were marketing world-beating investment products.

The bank regulator, Leroy King

The prosecution alleges Mr Stanford showered the Antiguan official with bribes, including impossible-to-get tickets to the US Super Bowl and tens of thousands of dollars in cash from Swiss bank accounts, and even swore a blood oath to win his assistance in shielding Stanford International Bank from prying eyes. He says local laws mean he cannot assist the SEC.