A former investment advisor admitted to defrauding his clients by “cherry picking” profitable trades for his own accounts, while allocating his losing trades to clients.
In 2024, a former advisor — who worked at a series of firms in Washington state after starting his career on Wall Street — was charged both criminally, and by the U.S. Securities and Exchange Commission (SEC), in connection with an alleged cherry-picking scheme that ran between 2015 and 2022.
The regulator said the scheme was uncovered by analysts in its market abuse unit, which used data analysis tools to detect patterns of suspicious trading.
In its complaint, the SEC alleged that William Carlton “generated millions of dollars in ill-gotten gains through his clandestine cherry-picking scheme.”
The alleged scheme involved placing trades in personal accounts early in the day, but then allocating the trades either to his own account, or transferring them to client accounts, based on whether the trades proved profitable during the trading day. Overall, the SEC alleged that Carlton generated approximately US$5.3 million in illicit profits from the scheme.
On Thursday, the U.S. attorney for the Southern District of New York (SDNY) announced that Carlton pleaded guilty to securities fraud in the criminal case. He is expected to be sentenced on Jan. 27, 2027.
“Investment advisors are required to act with integrity and put their clients’ interests ahead of their own,” said U.S. attorney for the SDNY, Jamie McDonald, in a statement.
“William Carlton instead admitted to systematically steering profitable trades to himself while leaving losing trades for his clients. Today’s guilty plea holds him accountable for abusing that trust for personal gain,” he added.
The SEC’s complaint seeks permanent injunctions, disgorgement and civil penalties.
Previously, the SEC entered settled cease-and-desist orders against Carlton’s former firm, Cetera Investment Advisers LLC, in connection with alleged compliance failures.