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Transcripts shows how man accused of running a Ponzi Scheme promised to return funds

New information about Ponzi scheme run be Wilmington financial advisor
Published: Apr. 20, 2022 at 5:22 PM EDT
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WILMINGTON, N.C. (WECT) - New details in the alleged Ponzi Scheme conducted by a Wilmington man show years worth of investments lost, and how the Securities and Exchange Commission says how one man spent his clients money.

Shawn E. Good worked for Morgan Stanley, which terminated his employment in February for reportedly refusing to cooperate with an internal investigation. When reached for an interview, a Morgan Stanley spokesperson provided a statement.

“This individual is no longer employed at Morgan Stanley. The conduct alleged in the complaint is plainly unacceptable. We are currently reviewing the matter, which affects a small number of clients, and are cooperating with the SEC and other government authorities,” according to the statement.

Good reportedly refused to cooperate with an internal review with Morgan Stanley, and when questioned by the SEC, asserted his right to remain silent under the Fifth Amendment.

SEC filings claim Good ran the scheme for a decade.

“Starting around December 2012, and continuing to at least February 2022, Good solicited clients to transfer funds to Good’s personal bank account, ostensibly to make low-risk investments in real-estate development projects and tax-free government bonds. Often, clients funded these transfers using Morgan Stanley credit lines secured by the clients’ investments at the firm. But Good in fact used those funds to repay his earlier victims and also to pay his personal expenses,” according to the filings.

Those documents show at least two of the victims live in Carolina Beach and Kure Beach — a mother and daughter who lost more than $2 million investing with Good. However, that money is less than half of what the federal government says he has taken from clients.

“To date, the Commission staff has identified at least $4.8 million of investor funds drawn into this scheme, resulting in at least $2 million of investor losses. At least three investors are currently owed money as a result of investing in Good’s scheme,” according to the lawsuit.

Many of the investments Good claimed he was making for clients made bold claims, promising significant returns on investments over a short period of time.

“Good told clients that he would use these funds to invest in land development projects and tax-free North Carolina state or municipal bonds on their behalf. Good also told the clients that these investments were “low-risk” and would pay returns of between 6% and 10% over three-month or six-month terms,” according to the SEC.

Cars, debt, and hotel stays

While investors believed Good invested their money in legitimate securities, it turns out he was using those funds for other, more personal purposes.

Good allegedly used money from his investors to make payments for personal items, like a Tesla, more than $800,000 in credit card debt, and Venmo payments with subject lines including: ‘Because you’re sexy, ‘tattoo’ ‘Hotel for Destiny,’ and ‘Shopping.’

Two of the clients Good allegedly took money from were local to the Cape Fear region, a mother and daughter who invested nearly all of their money with Good. The SEC has identified them as ‘Investor 4′ (the mother) and ‘Investor 5′ (the daughter).

“The most recent victim was one of Good’s investment advisory clients at Morgan Stanley. She is also a divorced mother of two young children who received approximately $1.9 million in her divorce settlement in early 2020,” according to the SEC.

In total, the SEC says she lost $1.3 million, almost all of the settlement money and the money she relies on to pay for living expenses.

“Investor 5 specifically told Good that her settlement was all the money that she had and would be her primary source of income with which to care for herself and her two young children.”

Instead of using that money as he claimed he would, investing in low-risk municipal bonds, the SEC says Good used that money to pay back another investor, as well as other personal purposes.

After becoming suspicious of Good handling her investments, Investor 5 decided to record phone calls with Good. Transcripts of those calls were provided by the SEC and show the concerns the investor had, and her suspicions she was investing in a Ponzi Scheme.

Below is part of the transcripts provided:

INVESTOR 5: So I want to ask you a real — I mean, and I don’t know if I’m going to get the honest answer, but I still want to ask the question. Was like — is this a legal fund that I’m in?

GOOD: Yeah it’s — yeah. Well, it’s legal, but at the same time, I don’t know what — I don’t know what triggered all this stuff, this investigation thing.

INVESTOR 5: … But our investment was — it’s like, legal, and, like I mean, how do we know it’s not a Ponzi scheme?

GOOD: It’s not. It’s not. I mean, the money is there. It’s coming back. It’s not.

According to the SEC, that money did not come back. Right now the pending lawsuit is only in civil court, but the Department of Justice does have the ability to file criminal charges against those who operate these types of schemes. It is not known yet if any criminal charges will be filed.

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