Last month, Michael Barry Carter (CRD 3232017) plead guilty in a federal court in Maryland to a six million fraud.  Carter was a financial advisor at Morgan Stanley’s McLean Virginia branch from 2011 to 2019.  During that time, he made at least 53 unauthorized transactions from client accounts and misappropriated at least $6,149,162.77. Carter returned approximately $1.8 million before his fraud was detected.  According to a press release, U.S. Attorney Robert K. Hur stated that Carter executed a “brazen scheme that defrauded victim account holders whose investments he was supposed to protect”.

To perpetrate his fraud, Carter forged clients’ signatures on authorization forms and provided clients with false financial statements.  In the case of one client, Carter got around his firm’s multi-factor verification system by answering the client’s telephone at her home to provide verbal authorization.  He sent client funds to his personal accounts to pay for his personal expenses including credit card bills and country club dues.

Carter’s fraud was discovered when an elderly client needed a loan to cover the costs of relocating to an assisted living facility. In the application process, the client learned that, unbeknownst to her, a $800,000 loan had already been issued in her name.  The proceeds of the loan were sent to Carter’s personal bank account.

In July 2019, Morgan Stanley discharged Carter after allegations that he misappropriated client funds. In September 2019, FINRA banned Carter from the securities industry for failing to provide documents and information in its investigation into his misconduct.

Since the fraud was discovered, Carter has been the subject of five different customer disputes filed with FINRA according to his BrokerCheck report.  The customers claim that he made unauthorized withdrawals and misappropriate funds from client accounts.  Four of the disputes have been settled for more than 6.5 million together.  One customer dispute alleging approximately $73,000 in damages is still pending.

As part of his plea agreement, Carter must pay approximately $4.3 million, which represents the net proceeds of his scheme.  He also faces maximum federal prison sentences of 20 years for wire fraud and five years for investment adviser fraud. Carter’s sentencing hearing will take place on November 9, 2020 before U.S. District Judge Paul W. Grimm.

If you believe that you have been misled by a financial advisor, please call the Costello Law Group at 410-832-800 for a free consultation. Tom Costello of the Costello Law Group has 25 years of experience in stockbroker misconduct and investment fraud.