Morgan Stanley Advisor Sued by SEC Over Alleged Ponzi Scheme

Morgan Stanley Ponzi Scheme SEC Lawsuit Overview: 

• Who: The U.S. Securities and Exchange Commission (SEC) filed a lawsuit against former Morgan Stanley financial advisor Shawn E. Good. 
• Why: The SEC claims Good defrauded novice investors out of at least $4.8 million during an alleged multiyear Ponzi scheme.
• Where: The lawsuit was filed in North Carolina federal court.

The U.S. Securities and Exchange Commission (SEC) is accusing former Morgan Stanley financial advisor Shawn E. Good of defrauding at least five investors out of at least $4.8 million during a multiyear Ponzi scheme. 

The SEC claims Good targeted novice investors. including retirees and a young single mother, and ultimately lost more than $2 million in funds they had entrusted to him. 

Beginning around December 2012 and through at least February 2022, the SEC claims Good, who worked as a broker and investment adviser representative at Morgan Stanley, started soliciting his clients to transfer their funds into his personal bank account.

Good’s clients believed their funds would be going toward “low-risk investments in real estate development projects and supposedly tax-free government bonds,” according to the SEC’s complaint. 

The SEC claims that, instead, Good used the funds to pay his personal expenses, including toward his Tesla and more than $800,000 in credit card bills, and other investors who had already fallen victim to the alleged Ponzi scheme. 

“At the end of supposed investment terms, Good often told clients that he had rolled their funds over into new investments with similar terms and rates of return,” the SEC complaint states. 

Former Morgan Stanley Broker Cost Single Mother Over $1M, SEC Suit Claims

One alleged victim the SEC highlights is a single mother of young children who lost more than $1 million in assets because of the alleged Ponzi scheme, which also cost her mother at least $933,750, according to the SEC. 

The SEC says Good “appears to have returned about $2.8 million of victims’ funds (some of which included purported profits on fictitious investments) but secretly relied heavily on Ponzi victims’ investments to make the repayments.” 

Good invoked his Fifth Amendment rights on nearly every question during his testimony, according to the SEC complaint. 

The SEC claims Good is in violation of the Securities Act, Exchange Act and Advisers Act. The agency is requesting a preliminary restraining order and preliminary and permanent injunctions be placed on the former Morgan Stanley broker. 

Morgan Stanley agreed to pay $60 million earlier this month to resolve claims revolving around data breaches it suffered in 2016 and 2019. 

Have you been the victim of a Ponzi scheme perpetrated by a financial adviser? Let us know in the comments! 

The SEC is represented in-house by M. Graham Loomis, Edward G. Sullivan and Joshua C. Hess.

The Morgan Stanley Ponzi Scheme SEC Lawsuit is Securities and Exchange Commission v. Good, Case No. 7:22-cv-00060, in the U.S. District Court for the Eastern District of North Carolina.

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