In April 2022, a customer filed a FINRA arbitration against Morgan Stanley for its role in the alleged Ponzi scheme operated by barred broker Shawn Good.
A “Ponzi scheme” is named after Charles Ponzi who was responsible for perpetrating an infamous fraud scheme in the 1920’s. He bilked New England investors by promising a 40% return in 90 days. In today’s investment news, investors have become familiar with this fact pattern from similar modern day scams, such as the Bernie Madoff case. Ponzi schemes are unsustainable and discovered when new victim investments cannot keep pace with the returns paid to previously victimized investors. Periods of declining markets will often uncover the wrongdoing when investor demands for withdrawals deplete the remaining funds.
Ponzi schemes are able to grow because the wrongdoer is associated with or otherwise connected to a reputable brokerage firm, insurance company, accounting firm, or law firm which either fails to properly supervise its agent, fails to question red flags, or fails to comply with its own internal or professional guidelines on how it must monitor its agents.
Common characteristics or tactics employed by the perpetrators of Ponzi schemes include:
According to FINRA Brokercheck, investors are seeking $2,275,000 for its claim relating to Shawn Good’s financial misconduct. The customers allege that Shawn Good misappropriated funds from the investors’ liquidity access lines from August 2019 to February 2022.
Per the SEC’s Complaint filed in April 2022, Shawn Good allegedly operated a 10-year Ponzi scheme that defrauded several clients out of at least $4.8 million. Starting around December 2012, and continuing to at least February 2022, Good allegedly solicited at least five investment advisory clients at Morgan Stanley to invest in purportedly low-risk investments in real-estate development projects and tax-free government bonds. However, Good used his clients’ funds to repay his earlier victims and to pay his personal expenses, such as luxury cars, credit card bills, and international travel.
Per FINRA BrokerCheck, Good was registered with Morgan Stanley from December 2012 to March 2022. Before joining Morgan Stanley, Good was registered with Wells Fargo Advisors, LLC in Wilmington, NC from November 2004 to December 2012. From 1996 to 2004, Good was registered with Charles Schwab & Co., Inc. in their San Francisco, California branch.
Per FINRA BrokerCheck, Morgan Stanley terminated Shawn Good in March 2022 because he “declined to cooperate with an internal firm review following client accusations.” FINRA barred Shawn Good from associating with any FINRA member in all capacities in April 2022.
Current and former customers of Morgan Stanley who held accounts with Shawn Good who have information relating to the manner in which he handled customer accounts are encouraged to contact Lawrence L. Klayman, Esq., at 1-888-997-9956.
KlaymanToskes is a leading national securities law firm which practices exclusively in the field of securities arbitration and litigation on behalf of retail and institutional investors throughout the world in large and complex securities matters. The firm has recovered more than $230 million for investors in FINRA arbitrations. KlaymanToskes has office locations in California, Florida, New York, and Puerto Rico.