Ex-Morgan Stanley broker sentenced to 5 years over $6 million fraud
U.S. District Judge Paul W. Grimm ordered Mr. Carter to pay $4,355,110.39 as he had already returned $1,794,052.38 to the victims even before being discovered.
Michael Barry Carter, a 47-year-old former financial advisor at Morgan Stanley, was sentenced to five years in federal prison, followed by three years of supervised release.
He was found guilty of wire fraud and investment adviser fraud related to a scheme to steal more than $6 million.
U.S. District Judge Paul W. Grimm ordered Mr. Carter to pay $4,355,110.39 as he had already returned $1,794,052.38 to the victims even before being discovered.
Acting U.S. Attorney Jonathan F. Lenzner said: “For more than 12 years, Michael Carter perpetrated a brazen scheme that defrauded victim account holders at a global bank of their life savings. When his fraud was discovered, Carter repaid some victims by stealing money from other victim accounts, and ultimately he stole close to $5 million.
“This case reflects the reality that large-scale fraud can still occur at a global institution with a robust compliance program, and it also reflects our commitment to holding bad actors accountable in order to provide restitution to victims and restore confidence in our system.
“The U.S. Attorney’s Office will continue to work closely with our federal law enforcement partners and the Securities and Exchange Commission to hold accountable financial advisors who defraud victims whose investments they are supposed to protect”, said Mr. Lenzner.
In July 2020, Mr. Carter pled guilty of making numerous unauthorized transactions from the victim accounts for his personal benefit, defrauding five customers of at least $5 million. The fraud lasted from at least October 2007 to at least July 2019, according to the statement of facts.
To go through with the wire fraud at Morgan Stanley, Mr. Carter submitted an internal bank authorization form that falsely stated that he had received verbal client instructions from each victim authorizing the transfer.
The transfers would then be sent to his personal accounts and the money was used to pay for his lifestyle expenses, including Carter’s mortgage, credit card bills, and country club membership fees.
The fraud was first discovered when one victim and her adult daughter attempted to obtain a loan from the bank only to find out that an $800,000 loan had already been obtained in the victim’s name without the victim’s knowledge.
Morgan Stanley then found the loan proceeds went to Mr. Carter’s personal bank account. Later, the bank discovered he had transferred approximately $5 million in unauthorized funds associated with clients of the financial institution, which then fired the fraudster.
According to the plea agreement, Mr. Carter made at least 53 unauthorized transfers from his clients’ accounts to his own accounts during the course of the scheme.
