Morgan Stanley: America's Sixth-Largest Brokerage Firm with Over $1.3 Trillion Under Management and $11 Billion in Profits Last Year.
Former Morgan Stanley Financial Advisor Jailed for Running $7 Million Ponzi Scheme at the Firm
A former financial advisor at Morgan Stanley has been sentenced to more than seven years in prison after confessing to running a Ponzi scheme amounting to $7 million over a period of more than a decade.
Despite the scam being targeted at Morgan Stanley clients and the advisor admitting to using a Morgan Stanley product to carry it out, the firm has resisted efforts to hold itself accountable.
Victims of the scheme claim that Morgan Stanley not only hindered their attempts to recover their money from the firm but is also holding them liable for lines of credit that the fraudulent advisor persuaded them to open.
Morgan Stanley, one of America's largest brokerage firms with over $1.3 trillion under management, earned $11 billion in profits last year.
The victims have expressed their frustration and distress, likening the experience to being assaulted while under the influence of mind-altering drugs and having to repeatedly relive the traumatic events.
The advisor, Shawn Edward Good, held the position of vice president in Morgan Stanley's Wilmington, North Carolina, office from 2012 until he was terminated abruptly after the scam's discovery in early last year. In September, he pleaded guilty to money laundering and wire fraud charges in federal court.
According to prosecutors, Good deceived at least a dozen clients into providing him with over $7.24 million, falsely promising them "low risk" investments. He instructed them to borrow against their portfolios using a Morgan Stanley product called a Liquidity Access Line of Credit, transferring the funds to him, with the assurance that he would handle everything else.
Fraudulent transfers
Former Morgan Stanley Financial Advisor Sentenced to Prison for Running $7 Million Ponzi Scheme
Shawn Edward Good, a former financial advisor at Morgan Stanley, has been sentenced to over seven years in prison for orchestrating a Ponzi scheme amounting to $7 million over more than a decade.
Good targeted Morgan Stanley clients, enticing them to invest in "low-risk" ventures, while instead, he misappropriated the funds for personal luxuries, including homes, luxury cars, vacations, and payments to multiple women. The scam was eventually uncovered in 2022, revealing that he had accrued $800,000 in credit card bills.
By exploiting Morgan Stanley's product known as the Liquidity Access Line of Credit, Good added a veneer of legitimacy to the fraudulent transfers. As a result, the victims were unknowingly funding the scam while also being held accountable for interest payments to Morgan Stanley, amounting to as much as $2,000 per month.
In addition to squandering the money on himself, Good used some of it to pay other investors, following the classic pattern of a Ponzi scheme.
A federal judge in Raleigh sentenced Good to 87 months in prison and ordered him to pay more than $3.6 million in restitution. However, the amount is insufficient to fully compensate the victims, as much of the pilfered money has already been depleted.
Morgan Stanley has faced arbitration claims from some of Good's clients, alleging the firm failed to adequately supervise its employee. While the firm has settled with at least one client under undisclosed terms, it has contested claims that it bears responsibility for Good's actions. Several victims have reported that the firm continues to enforce their lines of credit and charge them interest.
Despite the fraud occurring outside Morgan Stanley's systems, the firm has pledged to cooperate fully with law enforcement and work with the affected clients to address their claims. Some victims have reached agreements in principle with the firm to settle their claims.
Caitlin Andrews, one of Good's victims, trusted him partly because of his association with Morgan Stanley, believing that the firm thoroughly vetted its employees. The victims feel betrayed, and the firm's reputation is now under scrutiny as it navigates the aftermath of the Ponzi scheme.
Andrews emphasized to Good from the beginning that the money she entrusted to him was her entire life savings. As a single mother with limited earning power, those funds were vital for her daily living expenses, mortgage payments, her sons' college education, and health insurance.
As time went on, Good proposed a plan that would leverage her assets to invest in an Airbnb in her beach-side community, promising extra income with minimal risk. He presented a high-yield, low-risk bond that would supposedly pay out $15,000 every three months, which she could use for home improvements. Unbeknownst to her, Good arranged for these purchases using her Liquidity Access Line of Credit, with the funds ending up in his personal account, unbeknownst to her.
The truth began to surface early last year when investigators from the IRS and the North Carolina State Bureau of Investigators contacted Andrews regarding the money transfers from her brokerage account to Good. It was at this point that she realized something was amiss with her investments.
%20(1)-Photoroom.png)