The former Morgan Stanley advisor has been accused of defrauding NBA players of $13 million

former Morgan Stanley Cohen was arrested Thursday morning for allegedly defrauding current and former NBA players including Junior Holiday, Chandler Parsons and Courtney Lee.

Federal prosecutors said Cohen is charged with conspiracy to commit wire fraud and one count of wire fraud. Each charge carries a penalty of up to 20 years in prison. He also faces investment advisor fraud charges, which carry a maximum prison sentence of five years. Three others, including former NBA player Charles Briscoe’s agent, were also charged.

In the indictment, which was unsealed Thursday, the DOJ alleged that Cohen and the others engaged in two fraud schemes to divert nearly $13 million from NBA clients for personal use. The DOJ indicated that only $7 million of that amount was misappropriated by Briscoe and Calvin Darden Jr., who had previously pleaded guilty to separate wire fraud charges.

The names of the players were not mentioned in the Ministry of Justice announcement. Their identities were confirmed by a person familiar with the matter, who declined to be identified given the sensitive nature of the case.

The Justice Department alleged that Cohen and his alleged co-conspirators solicited the three clients to purchase expensive life insurance policies that Cohen later used to make renovations to his home and pool, as well as pay off his credit card bills and give the money to a romantic partner.

Prosecutors also alleged that Cohen directed the basketball players with donations to a nonprofit organization, which he eventually used to build sports facilities in his backyard.

“These defendants believe it would be a grave mistake to defraud their professional sports clients out of millions of dollars,” said U.S. Attorney for the Southern District of Columbia, Damian Williams, of New York, in an announcement Thursday.

Cohen was an advisor to Morgan Stanley from 2015 to 2021, according to his profile with the Financial Industry Regulatory Authority. The DOJ said in the charge sheet that the alleged fraud schemes occurred from approximately 2017 to 2020. Morgan Stanley fired Cohen in 2021 for “transactions not disclosed or approved by Morgan Stanley and using an unapproved platform to engage in inappropriate communications with clients,” according to FINRA filings.

“We have fully cooperated with the investigation and resolved client allegations regarding Mr. Cohen,” Morgan Stanley said in a statement. “Mr. Cohen was terminated from the company in March 2021 and has since been banned from the securities industry by FINRA.”

The Securities and Exchange Commission also indicted Cohen on Thursday for defrauding Holiday, Parsons and Lee of more than $1 million.

Cohen’s attorney, Brandon Reeve, did not immediately respond to a request for comment.

The three basketball players had previously filed lawsuits against Morgan Stanley with FINRA. These issues were later settled. Phil Aidikoff, who represents Holiday, Parsons and Lee, declined to comment due to confidentiality agreements in FINRA settlements.