Summary:  Internet "sleuths" pick up a scathing analysis of Sir Stanford's multi-billion dollar funds, which allegedly leads to the mainstream press getting hold of it and then, presto!, the SEC launches a criminal investigation and arrests Stanford.  Expect more of the same.

Most of us know about the phenomenon---the thus far successful phenomenon---of "crowd-sourcing."  For example, it is used by large corporations to solve R&D problems.  The "wisdom of the crows" has also given us Wikis, especially Wikipedia.

Now, a new form of crowd-sourcing arises.  Obviously, it is not on a scale of any of the examples above, but it may yet have its financial and social benefits.  Bloggers as sleuths---at least ones that get the word out enough that someone other than other bloggers notice.

Here's what happened (with a little guesswork to fill in the blanks).  Sir Alex Stanford had a successful investment business built around his Caribbean bank, with billions under management.  Like Madoff, Stanford apparently offered high and steady investment returns.  These promises should have been a red flag to investors.  It turns out that they were.  According to an article last month in The Economist , one person reviewed the offering and wrote a scathing report explaining why no one should invest.  So far so good.

The article was not so much about Stanford or the Internet but about the likelihood that more scams and scandals would be uncovered as the world economy nose-dived.  What caught my attention was that the author mentioned in passing that bloggers picked up the scathing review and started blogging on it.  Then, the mainstream press picked it up and it made front pages of prominent business and other papers.  And then, the SEC raided the offices of his investment fund and went looking for him.  They found him a few weeks later.

Whether or not Stanford is guilty of anything is not my point.  It was interesting because the bloggers picked up what seems to have been an obscure report (the original scathing review of Stanford's ROI).  We do not know much, though, about how it happened (and any help here would be appreciated).  We do know that their discussions caught the attention of some mainstream reporters.

The SEC could well have been planning on going after Stanford, anyway.  He had already been trouble.  Nonetheless, some lessons arise from this little nexus.

Probably the most important is that bloggers have earned respect because they have earned credibility.  Expect more such revelations.  On the other hand, you can expect a lot more chaff, noise and clutter---weird bloggers convinced of conspiracies in every shadow.  That may make the job of reporters more difficult.  And on that other hand, the more credible bloggers will improve their credibility by comparison.  They will become brands.  And brand-building is a strategy that works on the Web.  Call it a clutter-cutter.