Former Morgan Stanley Advisor Convicted in $5 Million Fraud Scheme Involving NBA Players
From the desk of Jim Eccleston at Eccleston Law
A federal jury convicted former Morgan Stanley advisor Darryl Cohen for orchestrating a fraud scheme that targeted three professional basketball players and resulted in losses totaling approximately $5 million, according to Wealth Management.
The conviction followed a five week jury trial. As Wealth Management reports, the jury found Cohen guilty of one count of wire fraud and one count of investment adviser fraud. The wire fraud conviction carries a maximum sentence of 20 years in prison, while the investment adviser fraud charge carries a maximum penalty of five years. The court will schedule sentencing at a later date.
According to the United States Department of Justice, Cohen defrauded three National Basketball Association players: Chandler Parsons, Courtney Lee, and Jrue Holiday. Wealth Management reports that prosecutors alleged Cohen gained the athletes' trust and then diverted their funds for unauthorized investments and personal expenditures.
Jay Clayton stated that Cohen built relationships with successful professional athletes and then misused those relationships to finance personal luxuries, including construction of a private basketball court at his home, according to Wealth Management.
Cohen worked as a broker and investment adviser with Morgan Stanley from June 2015 through April 2021. His BrokerCheck history also lists prior positions at Merrill Lynch and Wells Fargo, where he spent approximately twelve years. Regulators barred Cohen from the securities industry in 2022, according to Wealth Management.
Prosecutors alleged that Cohen approached two of the players about investing in Beast Basketball, a nonprofit league founded by an associate of Cohen. Although the athletes declined the opportunity, Cohen nevertheless transferred at least $500,000 from their accounts to the that entity, according to Wealth Management.
The government also alleged that Cohen worked with accountant Brian Gilder to steer the athletes into purchasing viatical life insurance policies at heavily inflated prices. As Wealth Management reports, Gilder arranged for a law firm he controlled to purchase the policies and then resell them to the athletes at markups ranging from 222 percent to 310 percent. The transactions generated approximately $4.5 million for the law firm.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
Tags: eccleston, eccleston law, securities fraud, investment fraud, financial advisor misconduct, morgan stanley, professional athlete investments
