Bold takeaway: Even trusted financial advisors can hoodwink high-earning athletes, and the fallout can reach multiple players and years of investigations. But here’s where it gets controversial: does the system fail to safeguard wealthy clients, or do those clients bear responsibility for vetting experts who handle their money? Now, here’s a clearer, expanded rewrite of the original report.
A former Morgan Stanley advisor, Darryl Cohen, was found guilty by a Manhattan jury of wire fraud and investment adviser fraud in connection with a scheme that harmed NBA players, including Portland Trail Blazers guard Jrue Holiday. The charges stem from actions prosecutors say Cohen carried out in 2023, targeting Holiday and other players such as Chandler Parsons, a former Houston Rockets forward, and Courtney Lee, a former New York Knicks guard. Collectively, the scheme allegedly defrauded these athletes of more than $5 million.
Prosecutors allege that Cohen abused his professional position and fiduciary duties to orchestrate the fraud. One notable element of the scheme involved selling life insurance policies at substantially inflated prices. In these transactions, Cohen and his co-conspirators arranged for policies with a total face value of about $1.7 million to be sold for roughly $6.2 million. The difference between the true value and the marked-up price allegedly lined the pockets of Cohen and his associates.
Additionally, Cohen is accused of diverting approximately $500,000 from the players’ accounts to a basketball-related nonprofit organization. According to prosecutors, these transfers were framed as charitable donations. In a text message to one player, Cohen claimed the donation would “help a lot of future prospects and a lot of underprivileged kids,” but investigators say the funds instead supported the construction of athletic training facilities on Cohen’s property. Prosecutors also allege that some of the players’ money was used to settle disputes with other clients who were threatening to sue Cohen over losses tied to the scheme.
Cohen’s defense argued that some transactions had the players’ explicit approval, implying they were not defrauded. The defense also challenged the venue, contending that Southern District of New York was improper because none of the relevant financial activity occurred there and none of the defense witnesses resided in SDNY. Nevertheless, Judge Vernon S. Broderick did not dismiss the case.
Cohen faced a third count, conspiracy, which the jury could not reach a verdict on, so it did not result in a conviction on that charge. If sentenced on the remaining counts, Cohen could face up to 20 years in prison. He has the option to appeal his conviction to the United States Court of Appeals for the Second Circuit.
Cohen was previously charged alongside Calvin Darden Jr., who, last year, received a sentence of 12 years and seven months in prison for defrauding Dwight Howard, Parsons, and others of roughly $8 million. Darden manipulated Howard into believing he was purchasing the WNBA’s Atlanta Dream, while the funds instead funded extravagant purchases for Darden, including cars and real estate. Darden is pursuing an appeal in the Second Circuit.
Thought-provoking questions for readers:
- What safeguards should financial firms put in place to prevent this kind of abuse by trusted advisers?
- Should athletes be required to use independent fiduciaries for certain transactions, or would that create unnecessary friction?
- How might the burden of proof and venue considerations affect the outcomes of fraud cases involving high-profile clients?
If you have thoughts on where the balance should lie—between client vigilance and industry oversight—share them in the comments.
