NBA athletes say they lost millions of dollars in alleged broker scam

Around the time that Lauren Holiday helped the United States women’s soccer team win the 2015 World Cup, she and her husband, NBA player Jrue Holiday, visited the office of a title broker in southern California. California. He had been recommended to the couple as a prudent advisor for making long-term investments.

Experient? The broker had worked for two decades for top-tier companies such as Morgan Stanley, Wells Fargo and Merrill Lynch. Well related? He said his specialty was advising athletes in all sports and that he had more than 70 professional athletes and former athletes on his client list.

But instead of following “a conservative to moderate investment strategy”, the Holidays claim that broker Darryl Cohen directed $2.3 million of their money to “dubious individuals and entities”. —and now most of that amount has been lost.

Other athletes said they had similar experiences. Chandler Parsons and Courtney Lee, who also played in the NBA, said Cohen and Morgan Stanley embezzled $5 million and $2 million of their investment money. inappropriate, and that most of that money has disappeared.

So Parsons, Lee and the Holidays filed a complaint with a financial self-regulatory organization, the Financial Sector Regulatory Authority (FINRA), which oversees brokerage firms.

“I feel invaded and exploited,” Parsons said in a statement sent to The New York Times by Phil Aidikoff, an experienced financial lawyer in Beverly Hills, Calif., who represents the aforementioned athletes and more. one person in separate complaints filed last year.

The athletes’ cases are still months away from resolution through a settlement or arbitration hearing, but Finra took drastic action in a separate complaint last week, barring Cohen from continuing to work in the securities market. By refusing to cooperate with Finra’s inquiry into “misuse of client funds”, the organization said, Cohen had “impaired an investigation into potentially serious misconduct”.

Representatives for Morgan Stanley declined to comment. However, in documents submitted to regulatory authorities, the company said it fired Cohen in March 2021 due to “transactions not reported to or approved by Morgan Stanley”.

Contacted by cell phone, Cohen replied that he would call back. He did not respond to a later message, and his attorney, Brandon Reif, declined to comment.

Finra’s cases are typically confidential and documentation about them is not publicly available. Aidikoff, saying lawsuits were likely, did not respond to requests for interviews with his clients about the case. But the fact that the athletes have decided to go public underscores their determination to “make sure the same thing doesn’t happen to other people,” Parsons said, and to encourage other victims to come forward.

Lee said in a statement that he believed Morgan Stanley would put the interests of a client like himself, who had invested in the company for many years, first. “I was wrong,” he declared.

The Holidays, known for their involvement in philanthropy, said: “We are all exposed to exploitation by people like Darryl Cohen. We are disappointed that a company as well-known as Morgan Stanley has allowed someone like Cohen to put himself in a position to transfer money from of customers the way he did”.

There is no shortage of stories about famous athletes who were scammed or involved in high-stakes financial schemes. An Ernst & Young report from last year reported that professional athletes reported nearly $600 million in fraud-related losses in the 2004-2019 period. “The incidence of fraud in sports appears to be getting worse,” the statement said.

But Parsons, Lee and the Holidays are a different case, Aidikoff said, because they did what many ordinary investors do: they turned to a large brokerage and instructed them to make low-risk, long-term decisions.

Jrue Holiday, 31, won an NBA title with the Milwaukee Bucks and an Olympic gold medal with the United States basketball team in Tokyo last year. He signed a four-year, $134 million contract extension in April 2021.

Holiday met his future wife, then Lauren Cheney, when the two were students at the University of California. in Los Angeles, and her football career led to endorsement deals with Under Armor and Chobani.

Parsons, 33, an accurate pitcher whose best seasons have been with the Houston Rockets and Dallas Mavericks, retired in January, two years after a serious car accident caused by a drunk driver. His last contract, signed in 2016, was a four-year deal worth $94 million, and he invests in real estate in the Los Angeles area.

Lee, 36, played for the Mavericks, the eighth team of his career, in 2020 after signing a four-year, $48 million contract with the New York Knicks in 2016. He suffered a serious ankle injury in 2020, but played golf last year in Thousand Oaks, Calif., with Parsons, Aaron Rodgers (the Green Bay Packers quarterback) and others.

The athletes apparently obtained information about Cohen from others in the basketball world, including a former NBA player who later became an assistant coach, Aidikoff said.

Cohen worked with his father, Marc Cohen, at the same branch as Morgan Stanley in Westlake Village, California. His father has not been charged with any violations and remains employed by the firm, records show.

The Holidays were introduced to Darryl Cohen in mid-2015; Parsons met him at the end of the same year, and Lee sometime in 2017, according to their statements to Finra.

In mid-2020, a business adviser to Parsons noticed some strange details in the athlete’s investments with Morgan Stanley. After Parsons contacted Aidikoff’s office, lawyers discovered that Cohen and Morgan Stanley had apparently sent checks and money transfers from Parsons’ accounts to questionable entities, including an alleged charitable organization that built a basketball court in the backyard of Parsons. Cohen’s house.

All athletes invested in life insurance policies based on misleading information provided by Cohen, and used an accountant recommended by him. But the accountant was actually an insurance broker, and the person who signed the athletes’ tax documents — the insurance broker’s father — was a lawyer who didn’t know them and never spoke to them.

Cohen has been the subject of a few other complaints, according to regulatory filings. In March 2021, Nyjer Morgan, who played baseball for four Major League teams, accepted a $125,000 settlement to settle a lawsuit over improper use of “a used liquidity access facility.” to lend funds to outside business entities”.

A former client of Cohen’s, also a retired professional athlete, told the New York Times that he had decided to turn to the broker for referrals from friends and after a sales dinner at which Cohen showed him financial results charts. But a year later, when the client noticed financial transactions that struck him as strange—and lost tens of thousands of dollars as a result—he became alarmed and instructed his agent to find another broker immediately.

“It’s painful and something you don’t forget,” said the athlete, who spoke on the condition that his name not be revealed to avoid having to publicly relive a painful experience.