Updated from 1:37 p.m. EST

A knighted Texas billionaire tricked clients into pouring money into three of his companies with false promises of outsized returns, according to fraud charges filed Tuesday by the Securities and Exchange Commission.

The SEC alleges that Sir Robert Allen Stanford orchestrated a "massive" scheme, centering around $8 billion worth of certificates of deposit that promised "improbably and unsubstantiated high interest rates." In addition to Stanford, the SEC also charged James Davis, CFO of Stanford International Bank, and Laura Pendergest-Holt, chief investment officer of Stanford Financial Group.

Stanford offered those products through an offshore firm, Stanford International Bank, claiming that the high rates were achieved through returns from his Houston-based broker-dealer firm, Stanford Group Co. However, the SEC says that Sir Allen Stanford fabricated historical return data over the past 15 years. A third company, investment adviser Stanford Capital Management, is also named in the charges.

The SEC also accuses Stanford Group Co. of conning registered investment advisers into investing in a proprietary mutual fund wrap program called Stanford Allocation Strategy based on fake performance data. Those advisers forked over $1.2 billion worth of clients' money, according to the SEC.

David Marder, a partner with Robins Kaplan Miller & Ciresi, says complicated, unrecognized products can often be red flags.

"There ain't nothing new under the sun," says Marder. "If you're investing in stocks, you're investing in stocks; if you're investing in options, you're investing in options; if you're investing in bonds you're investing in bonds. So if you're investing in something no one's ever heard of before, it's probably not legit."

If you liked this article you might like

Bank Dividend Decision Appears Imminent

Bank Dividend Decision Appears Imminent

AIG: Financial Winner

AIG: Financial Winner

Wells Fargo Searching for Broker Buy

Wells Fargo Searching for Broker Buy

Bank of America Expands Military Mortgage Aid

Bank of America Expands Military Mortgage Aid

Barclays, Deutsche Need Capital: Spain

Barclays, Deutsche Need Capital: Spain