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The SEC Alleges Shawn Good Operated a Ponzi Scheme While Registered with Morgan Stanley

May 17, 2022 Articles

Shawn Good is the subject of SEC allegations that he operated a Ponzi scheme for nearly a decade while registered with Morgan Stanley. According to the SEC complaint, Shawn Good “defrauded his clients—novice investors who trusted Good, including retirees and a single mother of young children—of at least $4.8 million, resulting in more than $2 million in investor losses.” 

Shawn Good allegedly persuaded investors to send him money under the pretense that he would invest their funds in low-risk investments. In 2020 and 2021, however, Shawn Good used at least $1.6 million of new investments to repay existing alleged Ponzi scheme victims. He allegedly represented that this money was a return on their investments. 

Although investors have lost millions of dollars, they may still be able to recover their investments through FINRA arbitration. Contact our experienced securities attorneys to start the process of getting your money back: 877-600-0098 or info@kurtalawfirm.com

Shawn Good Allegedly Defrauded Morgan Stanley Investors 

Shawn Good allegedly targeted five Morgan Stanley clients for his scheme. Investors reportedly transferred money to the broker from their Morgan Stanley accounts, including their credit lines. These investors had limited investing experience, and they relied on Shawn Good for investing advice. 

One investor, a single mother, relied on her investments for her livelihood, most of which she obtained through a $1.9 million divorce settlement. Between May 2020 and December 2021, Shawn Good allegedly convinced this investor to transfer approximately $1.3 million to his bank account. When the investor confronted Shaw Good, he suggested to her that a lawyer or law enforcement officer would “dig around,” and thereby hinder his efforts to pay her back. He also directed the investor to email his personal account, stating, “I can’t have any of this going back to Morgan Stanley.” 

This investor’s mother is another alleged victim of Shawn Good. She claims she specifically told Shawn Good that she needed safe investments and planned to use her investments with Morgan Stanley to pay for nursing home expenses. The investor paid Shawn Good a total of approximately $950,000, most of which allegedly paid for his personal expenses. 

What Did Shawn Good Tell Investors? 

Shawn Good allegedly told investors their investments were low-risk and would pay returns of 6% to 10%. Investments that offer such high rates of return are typically higher risk. Investors should keep in mind that investments that sound too good to be true probably are. 

Shawn Good allegedly solicited clients to transfer money to his personal bank account. He allegedly told investors that he would use the money to make low-risk investments in real estate development projects and tax-free North Carolina state or municipal bonds. 

Instead, Shawn Good allegedly used new investments to pay off previous investors and to pay his personal expenses, including payments for his Tesla, $23,000 in payments towards his Alfa Romeo Stelvio, and over $800,000 in credit card bills. The SEC also alleges that Shawn Good made $110,000 in Venmo payments. The payments had memos like “because youre sexy,” (sic) “tattoo,” “Hotel for Destiny,” “Nailz,” and “shopping.”

More Broker Check Disclosures: Investor Dispute and Regulatory Action 

Prior to his regulatory action, there is only one investor dispute on his BrokerCheck record—a dispute that his firm denied. Investors should always review their broker’s FINRA BrokerCheck record and remember that firms can deny disputes without any external review. Any disclosure—denied or not—should give investors pause. 

FINRA barred Shawn Good on April 14, 2022, following allegations that he refused to appear for on-the-record testimony in the course of a FINRA investigation. This followed Morgan Stanley’s submission of a Form U5, a form that firms are required to file when a broker leaves the firm. You can read a copy of the FINRA bar here

How Can an Investment Attorney Help? 

If your stockbroker operated a Ponzi scheme, or simply chose investments with too much risk for your financial situation, an investment attorney can help hold your brokerage firm responsible. FINRA Rule 3110 states that brokerage firms must establish a system designed to ensure brokers follow securities laws. Investors can file a statement of claim with FINRA in order to pursue FINRA arbitration

Brokerage firms often require investors to resolve disputes through FINRA arbitration instead of suing in a civil court. There are advantages to arbitration—for instance, the process is usually resolved quicker than a civil case. But there is an extremely limited chance for appeal once the arbitration panel makes its ruling, so it is crucial that investors get all the legal assistance they need to ensure a successful settlement.