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Elderly Widow Defrauded of Nearly $2.1 Million; Investment Firm Ordered to Pay

A 75-year-old widow from Florida fell victim to a sophisticated scam operation over the summer of 2023, losing nearly $2.1 million. In a recent ruling, her investment firm has been mandated to reimburse her $843,000, as indicated in her complaint reported by AdvisorHub and supported by a decision from the Financial Industry Regulatory Authority (FINRA) arbitration panel.

According to Barron’s, the arbitration panel found Morgan Stanley negligent for permitting the victim, Marjorie Kessler, to execute two significant withdrawals from her accounts—actions deemed “large and unusual” given her typical banking habits. Kessler argued that her investment advisors failed to recognize the atypical nature of her requests and neglected to take adequate precautions by not providing a “trusted contact” for her accounts, as mandated by regulatory guidelines.

The fraudulent scheme involved various perpetrators who impersonated technical support staff, bank employees, and government officials. Kessler was falsely informed that she was a target of identity theft and that her assets were at risk of being frozen. This manipulation led her to make two substantial cash withdrawals, which she then converted into cash, gold bars, and cryptocurrency.

The two transactions occurred in July and August 2023, just a fortnight apart, and collectively accounted for about one-third of her total assets held at Morgan Stanley.

In defense of their actions, Morgan Stanley characterized Kessler as “incredibly sharp,” asserting that she had been managing her finances independently for nearly two decades. The firm contends that Kessler misled her advisor by claiming that she was using the funds to purchase two condominiums—one for herself and another for her recently divorced daughter.

In a statement regarding the arbitration outcome, Morgan Stanley expressed sympathy for Kessler as a victim of fraud but maintained that “this fraud did not occur at Morgan Stanley.” They emphasized that Kessler’s losses stemmed from their assertion that she made false statements about the purpose of the transfers and authorized the funds to be sent to a third-party bank account in her name.

Kessler’s legal representation, Lloyd Schwed, countered these claims, stating that Morgan Stanley had “ignored multiple red flags” and failed to carry out proper oversight, as noted by Barron’s. “Morgan Stanley is just trying to explain away its negligence in believing a preposterous story that a 75-year-old widow suddenly needed to borrow more than $2 million in a span of eight days to buy not one, but two homes,” Schwed argued.

Schwed expressed gratitude to the arbitrators for acknowledging the vulnerability that senior investors face in tech support and government impersonation scams.

Kessler had originally sought compensation of $1,744,470 but ultimately was awarded less than half of that amount. The fate of the scammers involved in this operation remains uncertain.

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