Stanford Financial, the latest investment firm with a founder grabbing headlines for all the wrong reasons, appears to have plowed $8 billion worth of high-yield bank CD proceeds into illiquid real estate and private equity investments.

The problem isn’t so much with the actual investments but rather that investors bought the high-yield certificates thinking their assets were a little more liquid and secure than what is typical for alternative assets.  As more details emerge, it’ll be interesting to see what private equity deals/funds CD holders actually own.  Hopefully, the $8 billion doesn’t turn out to be a complete wash.  Unlike Madoff and Co., at least Stanford invested in something.