US

Former Morgan Stanley financial adviser charged with stealing $6 million from clients


Carter, 47, allegedly stole from victims including an elderly investment advisory client who had been saving a college fund for her grandchildren and from people he knew “through familial ties and friendship,” according to a complaint brought by the Securities and Exchange Commission. The complaint alleges he used the money to fund an expensive lifestyle that included a luxury car and large home mortgage.
Carter has not yet entered a plea in response to the SEC’s charges. Federal criminal charges were also leveled against Carter, to which he pleaded guilty on Monday, according to a release from the District Court of Maryland.

“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 worked as a financial adviser and broker at Morgan Stanley (MS)‘s McLean, Virginia, office from 2006 to 2019, except for a several-month period in 2011 when he worked for another financial services firm, according to the SEC’s investment adviser registry. He was fired from Morgan Stanley in July 2019 following allegations that he misappropriated client funds, the site shows, and is no longer licensed to work as a broker or investment adviser.

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.”

The SEC claims that Carter falsified internal documents in order to conduct dozens of wire transfers from brokerage clients’ accounts to his personal account. To carry out the alleged scheme, Carter sold securities without customer authorization and diverted clients’ account statements to addresses he controlled.

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.

After being fired from Morgan Stanley last July, Carter admitted to employees of the company in August that he had defrauded five people and “that he had forged clients’ signatures on bank authorization forms, that he had created false financial statements to disguise his theft, and in some cases had mailed those financial statements,” according to a press release from the District Court of Maryland.

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.

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