Ex-Morgan Stanley advisor guilty of fraud in scheme to defraud NBA players

A federal jury in Manhattan on Tuesday convicted a former Morgan Stanley financial advisor on two counts of fraud related to a scheme to rip off professional basketball players by overcharging them for insurance investments, according to a statement this morning from the U.S. Justice Department. 

The ex-advisor, Darryl Cohen, was convicted of wire fraud and investment advisor fraud, according to the reports. A third charge, of conspiracy was dismissed by the judge after the jury, which started deliberating on Friday, failed to reach a unanimous verdict. 

Cohen, 52, of Chatsworth, Calif., faces a maximum sentence of 20 years in prison for the wire fraud conviction and a maximum of five years for the investment advisor fraud. 

Cohen had been fighting charges that he defrauded NBA players out of millions of dollars when he sold them viatical settlements, a complex investment product that allows individuals with a limited life expectancy to sell their life insurance to another person or group. 

Cohen, along with three other people, was charged in March 2023 with six counts for schemes to defraud professional basketball players, according to a statement from the U.S. Attorney’s Office, the southern district of New York. 

As part of his scheme Cohen allegedly transferred $500,000 from the accounts of two professional basketball players as purported donations to a non-profit organization, according to federal charges. He then used approximately $238,000 of those funds to build athletic training facilities in the backyard of his home. 

Cohen was registered with Morgan Stanley in the Los Angeles suburbs from 2016 to 2021, according to his BrokerCheck profile, when the firm “discharged,” or fired him. The same year FINRA barred him from the securities industry.

Cohen’s trial began at the end of January. The NBA players who were the targets of Cohen’s alleged scheme included Jrue Holiday, Chandler Parsons and Courtney Lee.

From 2017 through 2020 Cohen managed a scheme to defraud three different professional basketball player clients of over $5 million by taking advantage of his advisory and fiduciary relationships with those clients, according to the federal charges.

Cohen conspired with Brian Gilder, an independent financial planner whom Cohen “encouraged his clients to work with and who assisted in tax preparation,” according to the federal allegations.

Cohen and Gilder allegedly fraudulently induced three athletes to purchase viatical life insurance policies at massive markups of 222%, 310%, and 244%, respectively, without disclosing Gilder controlled the transaction, according to the indictment.

Cohen and Gilder also allegedly used a sports agency and another law firm to channel approximately $328,125 of one of his client’s money to repay a former professional baseball player, a disgruntled client.

In February 2020, in the midst of making those payments, Cohen sent a message to Gilder saying: “We gotta send [the baseball player] more to get rid of him,” according to the indictment.

Gilder previously pled guilty to wire fraud conspiracy, according to Law360.