"How do you spot a liar? You ask him the same question three different ways and see if his answers are consistent." Allen Stanford, Forbes Magazine.

Allen Stanford was born in Mexia, Texas in 1950. He always had an eye for an opportunity. When he was 13, he made himself $400 by offering to clear a piece of land for a real estate developer on the condition that he could keep the felled trees to sell as firewood. In 1970 he enrolled at Baylor University, the oldest college in Texas. Stanford studied finance and, according to his class-mate James Davis, "while the rest of us were beating our brains out, he was making himself a lot of money teaching scuba diving".

Two years after his graduation Stanford joined his family firm as an entry-level salesman and bookkeeper. Stanford Financial had been founded by his grandfather, Lodis, in 1932. Lodis had been a barber but he spotted an opportunity in the insurance industry during the Great Depression and swapped trades. His son, Allen's father, took over the business when the time came.

When Allen Stanford joined the company in 1975 it was a mid-size insurance and real estate concern, with 10,000 customers in Texas. Over the next 35 years Allen Stanford drove that firm into a multi-billion dollar company, overseeing, according to their own PR, $51bn in investments at its peak. "I could not stay in a small town and be content," Stanford would later say.

His break came when the Texas oil bubble burst in 1983. House prices in Houston declined by 22% over a four-year period. Stanford Financial started buying real estate from banks in need of liquidity. Stanford would later recall: "For 28 months we were probably the only people in Harris County [Houston] buying real estate." The firm purchased dozens of properties on the cheap. As the economy recovered over the next 10 years Stanford and his father made several hundred million dollars.

That money provided the capital to kick-start the wealth management firm that would rise and fall so spectacularly over the next 15 years. Stanford immediately embarked on a push into the Latin American market, purchasing assets in Mexico, Venezuela and Ecuador. The off-shore banking division of the firm was established in 1985 in Montserrat. In 1991, for reasons that have never publicly been made clear, the local government revoked Stanford Financial's banking licence and the firm packed up shop.

They found the government of Lester Bird in Antigua to be more accommodating and relocated there. Bird succeeded his father, Vere, as prime minister in 1993. In the same year Stanford took over control of his firm from his father. The two men formed a fruitful partnership. At that point Stanford Financial had assets worth $350m. By 2008 Stanford's personal fortune was $2.1bn, enough for Forbes to rank him the 605th richest man in the world.

If the firm's departure from Montserrat was the first real red flag, there were many more over the years to come. In 1999 Stanford Financial tried to take over the Antiguan International Business Corps, who regulated offshore companies on the Island. Cables sent from the US Embassy to the State Department at the time described a "power grab" and added that "the high-powered legal and investigative hired guns from the US are likely being tasked with cleansing the files to make sure there is nothing in them that could damage or implicate the American offshore banker". Shortly afterwards the State Department issued an official warning to all domestic financial institutions in the US to be suspicious of transactions with Antiguan banks.

The Bird regime took steps to improve its banking laws. In Stanford's own words they "asked him to serve in an advisory capacity to the government" and he hired "a top-notch team of former US legal and regulatory professionals" to reform the banking laws. In 2001 the warning was lifted and, after that, Stanford's business in the US surged spectacularly. In 2003 Stanford Financial's US branch reported $17m in new deposits. In 2004 that figure rose to $150m.

As the profits grew, Stanford Financial expanded its lobbying activity in Washington. Between 2000 and 2006 the firm and its employees donated £2m to US political parties and candidates. The firm made significant contributions to the defence funds of two lawmakers – House members Bob Ney and Tom DeLay – who would later resign from office because of serious financial allegations. In 2004 Ney, who ultimately served 17 months in prison for conspiracy to defraud, received $12,000 in contributions from Stanford Group employees. At the time Ney was a member of the Financial Services Committee, a body regulating off-shore banking. In 2005 he had even praised Stanford on the Congressional record, "honouring and congratulating Allen R Stanford for his outstanding achievements". Stanford also attracted adverse criticism in the US for repeatedly using an airline under the control of his company – Caribbean Sun – to fly members of the House Caribbean Caucus to the West Indies for meetings and holidays.

There were also other, more trivial warnings of his nature. Stanford had always claimed to be related to Leland Stanford, the founder of Stanford University. He even funded the restoration of Leland Stanford's mansion in Sacramento, in an effort, he said "to help to preserve an important piece of Stanford family history". The only trouble was that the family connection did not exist: "We are not aware of any genealogical relationship between Allen Stanford and Leland Stanford," said a university spokesperson at the time.

Stanford hired his own genealogists to prove, most tenuously, that he was a sixth cousin, twice removed of Leland. He was a man with a highly developed appreciation of the value of his own public image. He put his name to polo and tennis tournaments in the US and branded his client Vijay Singh's golf bag with the company's eagle logo.

He had also built a groundswell of popular support in Antigua. As the largest single private employer on the island and a badly needed source of wealth and investment, he was phenomenally popular with the public there. His cricket tournament, the domestic version of which was first held in 2006, was the natural extension of those two priorities. It raised his brand profile in the right demographic and it increased his popularity and status in the Caribbean. Stanford was already providing the bread and here was the circus. Many Antiguans would sooner have said a bad word against their government than criticise him. It helped, of course, that he owned the Antigua Sun newspaper, not to mention the National bank.

His house was actually in St Croix, in the US Virgin Islands. In Antigua Stanford spent his time on his private yacht, moored off the coast. He claimed an intense kinship with the people of Antigua, based on the bizarre story of his encounter with a stigmatic priest from the island. In 1993 Stanford lent his private plane to fly the priest to New York for medical treatment. The priest had "scars on his hands and feet and oil gushing from his wounds," he said. Stanford also described meeting the man as giving a "life-changing" surge of religious faith.

Stanford lent vast sums of money, around $65m according to conservative estimates, to Lester Bird's government. It is difficult to be precise – the Bird regime consistently failed to file audited accounts to parliament. Stanford underwrote the construction of a new hospital and new executive offices for the government and the Stanford cricket ground complex itself.

"There is a misconception that I'm in bed with Lester Bird," Stanford would say. One man who thought the opposite was Baldwin Spencer, leader of the United Progressive Party, who replaced Bird as prime minister in 2004. "This man has a lien on our whole country," Spencer pronounced when he was in opposition. When Stanford was knighted in 2006, Spencer refused to stand during the ceremony. He would later damn Stanford in print as "haughty, arrogant and obnoxious" and deploring his "threats, innuendos and now downright political interference in our nation's affairs".

By now, on Jumby Bay, an island-haven for retired financiers just off Antigua's cost, the table talk of high society was all about where Stanford's money was coming from. There are some shrewd business minds on Jumby Bay and Allen Stanford's sums did not seem to add up. "He is either one of the world's greatest philanthropists or one of its biggest crooks," one Jumby resident said. But even now there is no question that he did many marvellous things for Antigua, such as the hospital and the slickly run cricket tournaments.

The Securities & Exchange Commission had doubts. The spark that set the investigation alight was supplied by two former Stanford Financial employees – Charles Rawl and Mark Tidwell – who resigned from the firm in 2008 on the grounds that they had been presented with a "Hobson's choice" situation, in which they were forced to resign rather than engage in illegal conduct. On 4 July 2008 it was announced that the SEC had issued both Rawl and Tidwell with subpoenas as part of an ongoing investigation into Stanford Financial. The plug had been pulled and the dirty water was slowly starting to drain from the bath.

Publicly Stanford was more confident than ever about his firm's fortunes. He described his business as recession-proof. "We haven't been caught up in all that sub-prime mortgage fiasco," he said in February 2007. Indeed he actually believed that the recession would enable him to help his firm grow, saying: "We're very bullish on making a lot of money in the next 20 years." Ultimately his venture into international cricket was an attempt to help him do that while also consolidating his profile and power in the Caribbean.

Like all good con-men he is intensely charismatic. He has bulging eyes, a booming voice and a handshake that could crush rocks. He swept people along in his slipstream with his fervour and quick intimacy. He had a policy of shaking every employee he met by the hand and a habit of thumping people on their backs with unfortunate force. All his employees wore the Stanford Eagle badge on their lapels and many were kitted out in Stanford-branded polo shirts. His company was run by Stanford family values, a set of old-time Texan notions. "Hard work, clear vision, value for the client" ran the company motto.

It was bluster. Stanford placed himself at the very centre of his business. Everything orbited around his six-foot-four bulk. And then, as the gyre widened, things fell apart. The Madoff scandal had thrust the issue of financial fraud to the front of the agenda and the case against Stanford, after long churning, had hardened into something concrete. The catastrophic fall-out has begun.