Overview
On March 4, 2026, a jury in the Southern District of New York convicted former Morgan Stanley investment advisor Darryl Cohen of investment advisor fraud and wire fraud for his role in defrauding NBA players Jrue Holiday, Courtney Lee, and Chandler Parsons (the “Professional Athletes”) of their investments. According to the filings, from approximately 2017 through 2020, Cohen used his advisory and fiduciary relationships with the Professional Athletes to misappropriate their funds and overcharge them for life insurance investments. In total, Cohen profited more than $5 million from the scheme. Cohen lavishly splurged some of the illicit proceeds on home improvements, pool repairs, a custom sports facility, a romantic partner, and credit card bills. While Cohen has yet to be sentenced, his wire fraud and investment advisor fraud convictions carry a maximum sentence of twenty years and five years, respectively.
As part of the scheme, Cohen fraudulently induced the Professional Athletes to purchase viatical settlement investments at massive markups, sometimes 310%, from a law firm that Cohen controlled. In addition, Cohen fraudulently misappropriated Parsons and Lee’s funds to Beast Basketball, an alleged non-profit organization that was building a state of the art sports complex at Cohen’s home. Cohen further misappropriated funds from Parsons’ account to Nyjer Morgan, a former professional baseball player. According to the criminal lawsuit, Cohen transferred the money from Parsons’ account to repay Morgan after Morgan expressed concerns with his investments and demanded his money back.
How to Protect Yourself
Athletes, as well as entertainers and entrepreneurs, are commonly targeted by investment fraudsters because they have access to large amounts of income, liquid capital, and/or wealth. These individuals may be vulnerable to investment fraud for various reasons, including but not limited to, time demands, misinformation, and the desire to protect their financial legacies. To fully protect yourself, education is the best tool. As such, below is a list of some common investment fraud athletes, entertainers, and entrepreneurs should be vigilant of to protect their money.
I. Avoid Complex Products
Complex products have multiple, evolving definitions. In essence, they are investment products that have features that make them fluctuate in value in a way that is difficult to understand the products and their risks. Investment products can also be complex if they combine different products and strategies. Many complex products are not actively traded, making them difficult to value.
Investors should avoid complex products with derivative components, contingencies in gains or losses, investments tied to the performance of markets (such as the volatility index), “principal protection,” and complicated limits or formulas. Specifically, athletes, entertainers, and entrepreneurs should avoid or limit investing in the following complex products:
- Structured Notes;
- Variable Annuities;
- Inverse Exchange Traded Funds (“ETFs”);
- Leveraged ETFs;
- Securities Employing Cryptocurrency Futures;
- Closed-End Funds;
- Interval Funds;
- Tender-Offer Funds;
- Business Development Company Funds;
- Options;
- Non-Traded Real Estate Investment Trusts;
- Private Placements; and
- Asset-Backed Securities.
While complex products serve an important role in financial markets, they are not suitable for every investor as they raise a number of investor protection concerns that may cause investors to not fully understand their risks.
II. Question Unsuitable Recommendations
An unsuitable investment is an investment that does not meet your objectives and risk profile. Before making any investment recommendations, financial professionals must seek information from investors about their background, age, education, investment history, work history, financial status, investment objectives, risk tolerance, investment timeline, and liquidity needs, to name a few. Gathering this information helps financial advisors assess whether a specific investment product is suitable. For example, complex products may not be suitable for a 23-year-old professional football player because he may need to conserve the capital earned during his playing career for the remainder of his life. In other words, a financial professional should probably not place such a person’s investments in speculative assets because of their investment objectives, investing timeline, and liquidity needs, among other reasons.
III. Check Your Accounts For Concentrated Positions
Another way athletes, entertainers, and entrepreneurs can safeguard their assets is to check for concentrated positions in their portfolios. Here, these investors can check whether their portfolios are too heavily invested in one asset type, class, or sector. Such investments are inherently risky because a decline in value can lead to catastrophic losses. For example, if an investor puts all of their capital in a single holding, and that company goes out of business, the investor could lose 100% of their investment. Unfortunately, overconcentrated positions may be hard to uncover, and may only reveal themselves after heavy investment losses.
IV. Confirm Investments and External Transfers
Last but not least, athletes, entertainers, and entrepreneurs can protect themselves by reviewing the activity in their account. Investors should take a careful look at their holdings, trade confirmations, and withdrawal activity to ensure that everything lines up. In addition, investors should be weary of investment opportunities that are related to investment opportunities outside the financial institution. Taking these steps can help investors detect misappropriation of assets in their accounts.
Impacted Investors
If you have suffered investment losses after your financial advisor recommended unsuitable investments, complex products, holding concentrated positions, or misappropriated your funds, do not hesitate to contact our office at 800-556-3526 or complete our contact form for a free consultation. We work on a contingency fee basis to try to recover losses. In other words, if we do not obtain a recovery, you do not owe us any legal fees. Act before time runs out on your claim.