Darryl Matthew Cohen, Ex-Morgan Stanley Advisor Convicted in $5 Million Fraud

Darryl Matthew Cohen, Ex-Morgan Stanley Advisor Convicted in $5 Million Fraud Against NBA Players

Former investment advisor Darryl Matthew Cohen has been convicted in federal court for defrauding three NBA players out of approximately $5 million, according to the U.S. Department of Justice.

Cohen, formerly affiliated with Morgan Stanley, was found guilty after a five-week jury trial of wire fraud and investment adviser fraud. He faces up to 25 years in prison and is scheduled to be sentenced at a later date.

The conviction follows earlier civil charges brought by the U.S. Securities and Exchange Commission (SEC) and criminal charges by the U.S. Attorney’s Office for the Southern District of New York.

Former Morgan Stanley Advisor Allegedly Defrauded NBA Players

According to court filings, Cohen defrauded NBA players including:

• Chandler Parsons

• Courtney Lee

• Jrue Holiday

Prosecutors alleged that Cohen portrayed himself as a “one-stop shop” financial advisor who would manage the athletes’ complex financial affairs.

Authorities say the players relied on Cohen’s advice and provided him discretionary authority over their investment accounts, allowing him to execute transactions without prior approval.

However, investigators say Cohen misused that authority to divert client funds for personal projects and undisclosed investments.

Misuse of Client Funds and Beast Basketball Scheme

According to the Department of Justice, Cohen funneled at least $500,000 of client funds into a nonprofit basketball league known as Beast Basketball, which was connected to an associate of Cohen’s.

Although the athletes ultimately declined to invest in the venture, Cohen allegedly transferred funds into the organization without authorization.

Prosecutors say a significant portion of the money was used for Cohen’s personal benefit, including $238,000 to construct a basketball court at his home.

Authorities also alleged that Cohen used client money to fund luxury expenses including:

• Renovations to his home and swimming pool

• Credit card bills

• Payments to a romantic partner

Fraudulent Life Settlement Investments

In addition to misappropriating client funds, prosecutors alleged Cohen conspired with accountant Brian Gilder to sell the players life insurance settlement investments at massive markups.

According to the DOJ, a law firm controlled by Gilder purchased the life settlements and then resold them to Cohen’s clients with markups ranging from 222% to 310%.

The scheme reportedly generated approximately $4.5 million in profits, while Cohen personally used portions of the funds for home improvements and other personal expenses.

Unauthorized Loans from Client Accounts

Authorities also alleged that Cohen improperly loaned approximately $328,000 from the brokerage account of Chandler Parsons.

The funds were used to repay former Major League Baseball player Nyjer Morgan, another client who had demanded repayment for investments and loans Cohen allegedly mishandled.

Parsons reportedly never authorized the use of his funds for that purpose.

FINRA Bars Darryl Matthew Cohen from Securities Industry

In December 2021, the Financial Industry Regulatory Authority (FINRA) barred Cohen from associating with any FINRA member firm in any capacity after he allegedly failed to fully cooperate with a regulatory investigation.

According to his FINRA BrokerCheck record, Cohen worked at Morgan Stanley in Westlake Village, California from 2015 until April 2021 when he was reportedly terminated.

His regulatory record reportedly includes multiple customer complaints, with allegations involving:

• Unauthorized transactions

• Unapproved outside business activities

• Misrepresentation and unsuitable investments

SEC Charges Against Cohen

The SEC previously alleged that Cohen knowingly or recklessly defrauded advisory clients by misappropriating their funds for unauthorized purposes.

According to the SEC complaint, Cohen:

• Diverted funds from client accounts to support Beast Basketball

• Withdrew funds from brokerage accounts without client consent

• Misused funds invested in life settlement transactions

The SEC is seeking permanent injunctive relief, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties.

Investors May Recover Losses Through FINRA Arbitration

Brokers and brokerage firms owe their clients a duty of care and loyalty, meaning they must place the client’s interests ahead of their own.

When a financial advisor misappropriates funds, recommends unsuitable investments, or engages in self-dealing, investors may have the right to pursue financial recovery.

Many investment disputes are resolved through FINRA Dispute Resolution, an arbitration forum that allows investors to pursue claims against brokerage firms or financial advisors.

You can learn more about FINRA arbitration claims and investor recovery options.

FINRA Attorneys for Securities Disputes

If you suffered investment losses involving Darryl Cohen or another financial advisor, the securities attorneys at The White Law Group may be able to help.

For a free consultation with a securities attorney, please call (888) 637-5510.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation law firm dedicated to helping investors pursue claims against brokerage firms and financial professionals.

Since the firm launched in 2010, it has handled over 800 FINRA arbitration cases nationwide.

Our attorneys represent investors in matters involving:

• Investment fraud

• Broker misrepresentation

• Unauthorized trading

• Unsuitable investments

• Churning

• Selling away

With more than 30 years of securities law experience, The White Law Group has the expertise to help investors attempt to recover their financial losses.

For more information, please visit www.whitesecuritieslaw.com.

FAQs About the Darryl Cohen Fraud Case

What did Darryl Cohen do to the NBA players?

Federal prosecutors alleged that former Morgan Stanley advisor Darryl Cohen misappropriated approximately $5 million from NBA players Chandler Parsons, Courtney Lee, and Jrue Holiday. He allegedly diverted client funds to personal projects, unauthorized investments, and fraudulent life settlement transactions.

Was Darryl Cohen banned from the securities industry?

Yes. In 2021, the Financial Industry Regulatory Authority (FINRA) reportedly barred Cohen from the securities industry after he failed to cooperate with a regulatory investigation.

Can investors recover losses caused by broker misconduct?

Yes. Investors who suffer losses due to broker misconduct may pursue compensation through FINRA arbitration, which allows claims against brokerage firms and financial advisors for misconduct such as fraud, unsuitable investments, unauthorized trading, and misrepresentation.