A former financial advisor at Morgan Stanley has been sentenced to over seven years in prison for running a $7 million Ponzi scheme over a span of ten years. Despite targeting Morgan Stanley clients and using a Morgan Stanley product to carry out the scam, the firm has resisted taking responsibility. Victims claim that not only has Morgan Stanley refused to help recover their money, but it is also holding them accountable for lines of credit that the fraudulent advisor convinced them to open.
Morgan Stanley, the sixth-largest brokerage firm in the United States with over $1.3 trillion under management and $11 billion in profits last year, has faced criticism for its lack of accountability. One victim, Caitlin Andrews, compares the experience to being assaulted while under the influence of drugs. She lost $1.7 million, her entire net worth, and describes the process of investigating the fraud as traumatizing.
The advisor, Shawn Edward Good, was fired from Morgan Stanley in early 2021 after the scam was exposed. In September of that year, he pleaded guilty to money laundering and wire fraud. Good convinced at least twelve clients to pay him over $7.24 million for supposedly “low risk” investments. Instead, he used the funds for personal expenses, including homes, luxury cars, vacations, and payments to multiple women. Good’s victims also discovered that while unknowingly funding his scam, they were responsible for paying interest to Morgan Stanley for their lines of credit.
Prosecutors determined that Good operated a classic Ponzi scheme, using some of the investors’ money to pay off other investors. In May, he was sentenced to 87 months in prison and ordered to pay over $3.6 million in restitution. However, this amount is not sufficient to compensate the victims fully, as much of the stolen money has vanished.
The victims have filed arbitration claims against Morgan Stanley, alleging that the firm failed to properly supervise Good. However, the firm has pushed back against these claims and is still holding the victims responsible for their lines of credit, charging them interest. Charles Hayward, one of the victims, is forced to keep his account with Morgan Stanley to manage his debt.
Morgan Stanley, which exceeded earnings expectations due to its wealth management business, declined an interview request. The firm stated that it promptly terminated Good once they discovered the fraud and has cooperated fully with authorities. They also mentioned that the fraud was conducted outside their systems, and transfers to Good were made from client accounts held elsewhere.
Caitlin Andrews, one of Good’s victims, expressed her trust in Good due to his employment at Morgan Stanley. As a single mother, the money she invested was crucial for her livelihood and her sons’ education. Good convinced her to invest in an Airbnb property, leveraging her holdings through a line of credit without her knowing the funds were going to his personal account.
The scam began to unravel when investigators from the IRS and the North Carolina State Bureau contacted Andrews early last year. She had no idea that something was wrong until then.
Overall, Morgan Stanley is facing criticism for its lack of supervision and accountability in light of the Ponzi scheme perpetrated by one of its former advisors. The victims are seeking financial restitution and justice for the harm caused by the fraudulent advisor and are questioning Morgan Stanley’s responsibility in the matter.
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