Allegations of Fraud Against Financial Advisor in NBA Case
A former financial advisor at Morgan Stanley is facing legal challenges in Manhattan federal court over allegations of defrauding National Basketball Association (NBA) players through the sale of viatical settlements. These complex insurance products involve the trading of life insurance policies from terminally ill patients to third parties.
Indicted in March 2023 alongside three others, Darryl Cohen faces multiple charges related to alleged schemes designed to defraud professional basketball players. The U.S. Attorney’s Office for the Southern District of New York claims Cohen was involved in transferring $500,000 from two players' accounts to a non-profit under the guise of a donation, later using approximately $238,000 to build sports facilities on his private property.
Cohen was associated with Morgan Stanley in Los Angeles from 2016 until his termination in 2021, following which the Financial Industry Regulatory Authority (FINRA) permanently barred him from the securities industry. His trial has commenced recently, with prosecutors concluding their case last week, according to Law360. NBA players such as Jrue Holiday, Chandler Parsons, and Courtney Lee were allegedly defrauded of over $5 million between 2017 and 2020 by Cohen exploiting his advisory role.
Complex Financial Schemes Uncovered
The prosecution alleges Cohen collaborated with Brian Gilder, an independent financial planner recommended to his clients for tax advice. Together, they reportedly misled three athletes into acquiring viatical policies at significant markups—222%, 310%, and 244%—while concealing Gilder’s control over the transactions.
Moreover, Cohen and Gilder are accused of using intermediary entities, such as a sports agency and a law firm, to funnel $328,125 from a client to settle disputes with a former professional baseball player, another dissatisfied client. Evidence against Cohen includes a 2020 communication to Gilder discussing the need to compensate the baseball player further to settle the matter.
Gilder has already pleaded guilty to wire fraud conspiracy charges, further elucidated by Law360's reports. This case highlights significant issues surrounding regulatory compliance and risk management within financial advisement for professional athletes.