Morgan Stanley Wins $8.7M Award Against Ex-Broker Who Duped NBA Players

A former Morgan Stanley broker who was convicted of duping three NBA players out of millions of dollars has been ordered by a Finra arbitrator to repay the bank more than $8.7 million plus interest tied to eight promissory notes.

Darryl M. Cohen, 52, of Chatsworth, Calif., also must fork over more than $560,945 in attorneys’ fees, $12,731 in costs, and $2,500 to cover Morgan Stanley’s filing fee, according to the Financial Industry Regulatory Authority award issued Wednesday by a sole public arbitrator.

Cohen worked for Morgan Stanley from June 2015 until March 2021, when he was fired. According to BrokerCheck, he was let go for “allegations relating to the representative’s facilitation of outside client business and transactions not disclosed to or approved by Morgan Stanley and use of an unapproved platform to engage in inappropriate communications with clients.”

Morgan Stanley sued Cohen for “breach of contract, unjust enrichment and quantum meruit,” alleging nonpayment of promissory notes that were due upon his termination.

Cohen had requested that the arbitrator deny the complaint and that Morgan Stanley’s U5 filing be expunged from his record.

In March, Cohen was found guilty by a Manhattan jury of defrauding his pro athlete clients—Portland Trail Blazers guard Jrue Holiday and former players Chandler Parsons and Courtney Lee—out of $5 million.

He was convicted of one count of wire fraud and one count of investment advisor fraud, after a month-long trial. He faces a maximum of 20 years in prison for wire fraud, as well as a five-year sentence for the investment advisor fraud. He is scheduled to be sentenced in November.

Cohen and a co-conspirator, accountant Brian Gilder, were charged by New York federal prosecutors in March 2023 with fraudulently inducing the three pro athletes to buy “viatical life insurance policies at massive markups,” prosecutors said.

According to prosecutors, Cohen and Gilder orchestrated the scheme from about 2017 to 2020. Cohen persuaded the three pro athletes to buy the insurance policies but did not disclose that the policies were being purchased from a law firm controlled by Gilder that sold the policies to the athletes at markups of 222%, 310%, and 244%.

According to a report by Bloomberg, one policy bought for around $465,000 was marked up to $1.6 million. Another, purchased for $620,000, was sold for more than $2.5 million.

Prosecutors said the law firm made $4.5 million from the purchases, and Cohen and Gilder enriched themselves with a substantial portion of the illicit proceeds. Cohen  spent about $178,462 to renovate his home and to perform work on his pool. He also used about $67,500 to pay off his personal credit card bill; and gave roughly $200,000 to an individual with whom he was in a romantic relationship, prosecutors said.

Cohen also transferred $500,000 from Parsons’ and Lee’s accounts, claiming it was donations to a non-profit organization, Beast Basketball. He also used $238,000 of the purported donated funds to build athletic training facilities in his own backyard, prosecutors said. The players did not authorize any transfer of funds, and they were also left in the dark about Cohen’s plan to build a gym in his backyard.

Prosecutors said when Parsons questioned the donations, he was told in a text by Cohen that the money “had helped a lot of future prospects and a lot of underprivileged kids.” 

Furthermore, prosecutor said Cohen, through a sports agency and another law firm, funneled $328,125 of Parsons’ money to repay a former professional baseball player, who “had expressed concern to Cohen about investments and loans that Cohen made on Morgan’s behalf and demanded to be repaid.” Prosecutors said Cohen was not authorized by Parsons to do that either.

Cohen could not be reached for comment. He started his career with Merrill Lynch in 1997, where he spent 12 years before moving to Wells Fargo, according to BrokerCheck. He was barred in December 2021 by Finra for failure to respond to requests for documents and information in connection with this investigation.

His attorney, Benjamin White of Bloch & White LLP, in New York, did not respond to an inquiry for comment.

Morgan Stanley declined to comment.