“For over 12 years, Michael Carter perpetrated a brazen scheme that defrauded victim account holders whose investments he was supposed to protect,” US Attorney for the District of Maryland Robert Hur said in the release. “When his fraud was discovered, Carter repaid some victims by taking money from other victim accounts.”
Carter could not be reached for comment. A Morgan Stanley spokesperson told CNN Business in a statement that the firm is “strongly committed to the protection of client assets, and to act quickly when fraudulent activity is uncovered.”
“The Advisor’s employment was terminated as soon as his activity came to our attention, and we immediately reported the matter to the appropriate law enforcement and regulatory authorities and have been cooperating with their investigations,” the spokesperson said. “There were a limited number of clients impacted and any money misappropriated by the advisor was returned.”
Carter also allegedly made almost $1.5 million in unauthorized transfers from the accounts of the elderly advisory client, sending nearly $1 million to himself and using some of the remainder to repay funds he had taken from another client, according to the SEC’s complaint.
In the case of one victim, referred to as Victim 1, Carter admitted he had met the woman at her home and “answered Victim 1’s phone in order to authorize the transactions, unbeknownst to Victim 1,” as a way of overcoming the financial institution’s multifactor verification system, the Maryland court said.
The SEC is seeking relief including the return of Carter’s “ill-gotten gains” and a civil penalty. As for the criminal charges, Carter faces a maximum sentence of 20 years in federal prison for wire fraud and a maximum sentence of five years for investment adviser fraud. As part of his plea agreement, Carter will be required to pay a monetary judgment of nearly $4.4 million, the total net proceeds he gained from the scheme.