Former Financial Advisor of Morgan Stanley Sentenced to 5 Years over $6 Million Fraud

The Department of Justice (DOJ) recently announced that U.S. District Judge Paul W. Grimm has sentenced Michael Barry Carter, age 47, former financial advisor at Morgan Stanley, to five years in federal prison, followed by three years of supervised release. 

In addition, Mr. Carter was ordered to pay $4,355,110.39 as he was found guilty of wire fraud and investment adviser fraud related to a scheme to steal more than $6 million. He paid some victims $1,794,052.38 before his fraud was discovered.

In July 2020, Mr. Carter pled guilty of making an array of 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.

During his time at Morgan Stanley, Mr. Carter implemented a wire fraud by falsely stating 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.