Former Morgan Stanley financial advisor Darryl Cohen has been arrested and charged for allegedly defrauding current and former NBA players. There are also other ex-Morgan Stanley advisors involved who allegedly scammed the pro athletes.
National Basketball Association players Jrue Holiday, Chandler Parsons, and Courtney Lee lost more than $7 million from an investment scam conducted by Cohen and his colleagues. Lee, Holiday, and Parsons aren’t alone in claiming to be defrauded by financial advisors. Professional athletes reported almost $600 million in fraud-related losses from 2004 to 2019, according to a 2021 Ernst & Young report.
Here are five things to know about the latest case.
Cohen is facing three federal counts of fraud. If found guilty, he faces up to 20 years in prison. Cohen is also charged with one count of conspiracy to commit wire fraud and one count of wire fraud, according to federal prosecutors. Each of these counts carries up to a 20-year prison sentence as well. On top of this, he is also facing investment advisor fraud charges, which carry a maximum five-year prison sentence. Three others, including former NBA players agent Charles Briscoe, were also charged.
The Securities and Exchange Commission also charged Cohen.
The players who were scammed include Jrue Holiday, Chandler Parsons, and Courtney Lee. While the names of the players aren’t in the Department of Justice’s announcement of Cohen’s arrest, their identities were confirmed by a person familiar with the matter, who declined to be identified given the sensitive nature of the case.
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Holiday met Cohen, a broker who had two decades of experience with blue-chip firms like Morgan Stanley, Wells Fargo, and Merrill Lynch, in 2015. Cohen put $2-plus million of Holiday’s money to “dubious individuals and entities.” Most of the money is gone.
Parsons and Lee also claimed Cohen improperly diverted millions of their investments and that most of that money has disappeared.
“We are all susceptible to being exploited by people like Darryl Cohen. We are disappointed that a company as well known as Morgan Stanley would enable someone like Mr. Cohen to be in a position that allowed him to move money out of our accounts the way that he did,” Holiday told CNBC.
The indictment was unsealed on March 23, and in it, the Justice Department alleged that Cohen and the others engaged in fraud schemes to transfer roughly $13 million from NBA clients for personal uses. The DOJ also said that $7 million of that was allegedly misappropriated only by Briscoe and Calvin Darden Jr., who has previously pleaded guilty to separate wire fraud charges.
According to the DOJ, Cohen and his co-conspirators lured the three clients into purchasing overpriced life insurance policies and Cohen later used the money to do renovations on his home and pool, as well as pay off his credit card bills and give money to a romantic partner.
Prosecutors also alleged that Cohen induced the NBA players to donate to a nonprofit, and he used that money to build athletic facilities in his backyard.
“These defendants believed that defrauding their professional athlete clients of millions of dollars would be a layup. That was a huge mistake, and they now face serious criminal charges for their alleged crimes,” said Damian Williams, the U.S. Attorney for the Southern District of New York, in an announcement.
The indictment document states that the alleged fraud schemes took place from roughly 2017 to 2020.
Cohen was an advisor for Morgan Stanley from 2015 to 2021, according to his Financial Industry Regulatory Authority profile. Morgan Stanley fired Cohen in 2021 for “transactions not disclosed to or approved by Morgan Stanley and use of an unapproved platform to engage in inappropriate communications with clients.”
Dallas Mavericks’ Courtney Lee in the second half of an NBA basketball game against the Minnesota Timberwolves, March 1, 2020, in Minneapolis. (AP Photo/Stacy Bengs)/Milwaukee Bucks’ Jrue Holiday during the second half of an NBA basketball game against the Orlando Magic, March 1, 2023, in Milwaukee. (AP Photo/Aaron Gash)/Memphis Grizzlies forward Chandler Parsons (25) plays in the second half an NBA basketball game against the Dallas Mavericks, April 7, 2019, in Memphis, Tenn. (AP Photo/Brandon Dill)