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Regulation and Compliance > Litigation

Ex-Morgan Stanley Broker Pleads Guilty to $7M Ponzi Scheme

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What You Need to Know

  • Shawn Edward Good defrauded at least a dozen of his clients at the wirehouse, according to the Justice Department.
  • He used clients' funds for several luxury vehicles and vacations, his Wilmington residence and a condo in Florida.
  • During a parallel SEC action, he invoked his Fifth Amendment right against self-incrimination to nearly every question.

A former Morgan Stanley broker pleaded guilty on Thursday to his role in a $7.2 million Ponzi scheme in which he defrauded at least a dozen clients of his at the wirehouse, according to court documents and the Justice Department.

Shawn Edward Good of Wilmington, North Carolina, pleaded guilty to wire fraud and money laundering and faces up to 360 months in prison, the Justice Department said.

Morgan Stanley declined to comment on Monday.

Good’s victims invested over $7 million based on false statements and misrepresentations made by the broker, according to the Justice Department.

Instead of investing the clients’ funds in land development or bonds, as he had promised them, Good used their money for luxury vehicles including a Mercedes-Benz, a Porsche Boxster, a Tesla Model 3, an Alpha Romeo Stelvio and a Lexus RX350; fine dining; and vacations to Las Vegas; Paris; Cinca Terra, Italy; Jackson, Wyoming; and other destinations.

He also spent clients’ funds on his Wilmington residence and a condominium in Florida, the Justice Department said.

To lend credibility to his scheme and elude detection, Good also used some investor funds to make payments to earlier investors, which is typical in Ponzi schemes, according to the Justice Department.

Good directed clients to transfer Liquidity Asset Line funds to their personal bank accounts and then wire the funds directly to his personal bank account, according to the Justice Department.  “Other victims paid Good by paper check and wire transfers using funds derived from sources other than Morgan Stanley accounts,” the Justice Department said.

Good joined Morgan Stanley in December 2012 as a broker and also served as a financial advisor, according to his report on the Financial Industry Regulatory Authority’s website. But the firm filed a Form U5 saying it terminated his registration in March 2022 “because he declined to cooperate with an internal firm review following client accusations,” according to a disclosure on his report.

Invoking the Fifth

Two client dispute disclosures are on his report. The first, dated April 13, 2022, says claimants alleged the advisor “misappropriated funds from claimants’ Liquidity Asset Line accounts” from August 2019 to February 2022. Those claimants requested $2.3 million.

The second client dispute, dated April 30, 2022, says the claimant alleged Good “misappropriated funds by soliciting an outside real estate investment opportunity to client” from 2015 to 2018. Both disputes are pending.

Without admitting or denying the findings of a FINRA investigation that started after Morgan Stanley filed its Form U5, Good signed a FINRA letter of acceptance, waiver and consent on April 5, 2022, in which he consented to be barred from associating with any FINRA member in all capacities.

On April 18, The Securities and Exchange Commission filed a complaint against Good in U.S. District Court for the Eastern District of North Carolina Southern Division, alleging he perpetrated a multi-year Ponzi scheme involving his clients at Morgan Stanley.

“At least three investors are currently owed money as a result of investing in Good’s scheme,” according to a disclosure about the SEC complaint on his FINRA report. “During testimony, Good invoked his Fifth Amendment right against self-incrimination to virtually every question — including when asked about his future plans to raise funds and/or to conceal assets,” the disclosure says.

“High yield investment fraud schemes are designed to appeal to people’s hope that ‘you can get something for nothing,’ often resulting in the total loss of the investment,” Donald “Trey” Eakins, Internal Revenue Service criminal investigation special agent in charge of the Charlotte field office, said in a statement. “Be assured that IRS Criminal Investigation, together with our partners at North Carolina State Bureau of Investigation (SBI) and the U.S. Attorney’s Office, will hold those who engage in similar behavior fully accountable.”

Prior to working for Morgan Stanley, Good served as a broker for Charles Schwab from 1990 to 2004 and then Wells Fargo Advisors from 2004 until 2012.

(Image: Shutterstock)