Formerly registered with Morgan Stanley, Wilmington, North Carolina-based financial advisor Shawn Good has been accused of operating a $4.8 million Ponzi scheme by the Securities and Exchange Commission (SEC). According to reported news, he faces two charges of felony. A federal judge in North Carolina has barred him from selling securities, based on the permanent injunction request of the SEC.
Based on a filing signed by U.S. Attorney Michael Easley for the Eastern District of North Carolina, the Triangle Business Journal has reported the charges as money laundering and wire fraud connected to an alleged Ponzi scheme and that clients of Morgan Stanley were involved.
In classic Ponzi fashion, after promising returns of between 6 and 10 percent to investors within a few months, Good started repaying older investors with money received from newer ones. In addition, he squirreled money away for personal use.
Good is being asked to surrender the $3.2 million prosecutors say he made from the scheme, apart from his homes in Broward County and Wrightsville Beach, Florida.
Charges similar to the civil case of SEC have been leveled in the federal criminal case, which reveals more sordid details of Good’s use of the money. Apart from settling over $800K in credit card bills, Good apparently paid for his Alfa Romeo Stelvio and Tesla with the misappropriated funds. Over $100K was remitted through Venmo, the payment platform, with accompanying messages like “Hotel for Destiny” and “because you’re sexy.”
According to his BrokerCheck profile, Good was a registered representative of Morgan Stanley from December 2012 till his termination in March 2022. The termination, according to the firm, was over the client’s accusations that he refused to cooperate.
He was barred by FINRA (Financial Industry Regulatory Authority) in April 2022 when he refused to appear for testimony in FINRA’s investigation into his dismissal by Morgan Stanley.
How to Protect Yourself From Ponzi Scheme Fraud
Ponzi schemes are a type of investment fraud that defrauds investors. They offer incredibly high returns and then collapse when there is no new capital available to pay off the ever-growing pool of existing investors. They can even devastate a small community. However, it is possible to protect yourself from these scams. Here are some tips:
Ponzi schemes are investment fraud
A Ponzi scheme is an investment scheme that involves a system where new investors are paid from the money they originally invested. The investment scheme’s creators often promise high returns in a short period of time. But no investment opportunity comes without risk. Even if an investment is legitimate, it is always subject to market fluctuations. That’s why you should always invest in securities that are registered. Registering your securities gives you access to information about the company.
The operation of a Ponzi scheme is a complex one. The principles behind it usually disappear with the money invested. The promoters usually don’t pay much, and they will continue to send statements to keep up the deception that the returns are high. However, this deception can lead to severe problems for the investors in Ponzi schemes. Once these problems arise, it can lead to bank runs and panics.
They promise high returns
A common characteristic of Ponzi scheme fraud is the promise of high returns in a short period of time. Such high returns entice people to invest because they believe they can beat the market. However, the returns are not consistent and are based on phony investments. This fact is one of the reasons why Ponzi schemes are fraudulent. Therefore, it is necessary to check the legitimacy of any investment before investing in it.
A typical Ponzi scheme involves an initial investment, which is paid back by new investors within a short period of time. It promises high returns in exchange for the initial investment, usually a small amount. It often makes use of vague verbal guises and takes advantage of investors’ lack of knowledge and competence. It may also claim to use a proprietary investment strategy that enables it to generate high returns. In order to continue to operate, a Ponzi scheme will need to attract more new investors to maintain its profits.
They fall apart when there is not enough new capital to pay the ever-growing pool of existing investors
A Ponzi scheme will eventually collapse when there is not enough new capital to pay out the ever-growing pool of existing investors. When this happens, the system becomes unstable, and the scheme fails. As a result, the system’s investors will lose money. In most cases, these schemes will only survive for a limited time. Some may last a few years, but many will fail after a few years. The Ponzi scheme is a type of financial scheme that uses a chain of investors to create a new pool of money.
A Ponzi scheme works by exploiting the lack of knowledge of new investors. The operator will pay high returns to lure new investors and entice current investors to invest more money. As more people join the network, other participants will follow. The next investor will invest, and the cycle repeats itself. Ultimately, the scheme will collapse when the schemer cannot find enough new capital to pay the ever-growing pool of existing investors.
They can devastate small communities
A Ponzi scheme is a type of security fraud in which a central operator deceives investors into investing in a nonexistent or inflated asset. The money collected from later investors is used to pay dividends to earlier investors. These schemes can devastate small communities and church congregations, with a large impact on a community’s finances. Kane, a practicing attorney, has experience in this area, having worked with small churches that have become victims of Ponzi schemes.
One of the most famous Ponzi schemes affected the American Jewish community. The fraud devastated many of the American Jewish community’s institutions and families. The crimes perpetrated by Madoff were staggering, and they exposed the incompetence of the regulatory system to protect investors. Despite numerous warnings, the regulatory agencies failed to stop Madoff. Many experts called the scandal a “riot of red flags.”