As revealed by the Securities and Exchange Commission (SEC), Shawn Good’s strategy involved convincing clients to invest money in what he claimed were low-risk real-estate development investments tax-free government bonds. In true Ponzi fashion, he was paying back older investors from the money generated from the newer ones.
A complaint was filed in April this year by the SEC against Wilmington, North Carolina-based financial advisor Shawn Good. Good was charged for his involvement in a Ponzi scheme valued at $4.8 million for investors who are reported to have lost over $2 million. The investors losing money were his clients during the time he worked for Morgan Stanley.
The regulator identifies some of the major items on which he spent this ill-gotten money as:
- paying for his Tesla and Alfa Romeo Stelvio
- settling over $800,000 in personal credit card bills
- remitting $110,000 via the payment platform Venmo
His BrokerCheck record shows Good as a registered representative of Morgan Stanley between December 2012 up and March of 2022. The SEC’s request for a permanent injunction was granted by a federal judge in North Carolina. Apart from being barred from selling securities, Good has been asked to make good the money he took away, along with interest. He is also prohibited from stating “that he did not violate the federal securities laws as alleged in the complaint,” as reported in the Business Journal.
An asset freeze and injunction ordered in April had already been agreed to by Good. He, however, did not deny or admit to the allegations placed in the court documents, as per the Business Journal.
According to the Triangle Business Journal, Joseph Zeszotarski, Goods’ lawyer, replying to the lawsuit in May, is believed to have invoked the Fifth Amendment 68 times. The Journal’s request for comments, however, was not returned by Zeszotarski.
Investing in a Ponzi scheme
What exactly is a Ponzi scheme, and how do you avoid investing in one? These schemes entice new investors with promises of consistent returns on investments, and when they fail, they swindle those new investors. In some cases, the scheme collapses in a matter of weeks or months, and the investors lose all of their money. The cost of investing in a Ponzi scheme can be extremely high.
Ponzi schemes operate by requiring an initial investment and promise a high return on investment while maintaining low risk. They typically employ vague verbal guises to lure new investors and often take advantage of a person’s lack of competence or knowledge. For example, the schemer may say that they employ a proprietary investment strategy, and pay the initial investors the returns from that money, even though it’s a scam.
The SEC warns investors to be extremely wary of scams that promise returns with no risk. Some victims have lost billions of dollars. However, if you are suspicious of a Ponzi scheme, you can report it to the SEC. Affected parties include innocent victims and beneficiaries. Don’t be afraid to report suspected scams to the SEC, as well as any associates of the perpetrator.
As of January 2019, the average number of investigations launched by the SEC has dropped to 827, down from a peak of more than 1,200 in 2008 and four times that amount. This number is alarming, as it hints at a possible return to a more sinister era. In fact, some experts fear that the financial crisis will lead us back to a time when Ponzi schemes were even more common and involved much larger sums of money.
