A jury convicted a former financial advisor in New York for defrauding a trio of NBA players by charging them massive markups on viatical life policies, misappropriating charitable donations and diverting assets.
Following a five-week trial, a former advisor with Morgan Stanley, Darryl Cohen, was convicted on one count of wire fraud and one count of investment adviser fraud, stemming from a scheme to defraud three clients that played in the NBA — Chandler Parsons, Courtney Lee, and Jrue Holiday.
According to court filings, between 2017 and 2020, Cohen defrauded his clients out of more than US$5 million by exploiting his advisory relationships with them in several ways.
First, he sold his clients viatical life insurance policies at markups of between 222% and 310% under an arrangement with a law firm that paid kickbacks to Cohen.
He also made US$500,000 in purported charitable donations on their behalf to a youth basketball program, with almost half of that money (US$238,000) actually being used to build a gym in Cohen’s backyard.
He also allegedly diverted over US$300,000 from Parsons to pay off another disgruntled client — former pro baseball player Nyjer Morgan, who suffered losses on his investments with Cohen.
“Financial advisor Darryl Cohen built trust with successful pro athletes — then betrayed it, stealing their money to fund personal luxuries, including a state-of-the-art gym in his own backyard,” said Jay Clayton, U.S. attorney for the Southern District of New York (SDNY), in a release.
In a parallel action, the U.S. Securities and Exchange Commission (SEC) has also alleged that Cohen breached his fiduciary duties to his advisory clients.
And, in 2021, the U.S. Financial Industry Regulatory Authority Inc. (FINRA) permanently expelled Cohen amid allegations that he failed to cooperate with the self-regulatory organization’s investigation into his conduct.
Following his criminal conviction, Cohen will be sentenced at a future date that has yet to be determined.