A 75-year-old widow in Florida was defrauded out of almost $2.1 million in the summer of 2023 by an intricate group of scammers. Now, her investment firm has been ordered to pay her $843,000, according to a copy of her complaint seen by AdvisorHub and a Financial Industry Regulatory Authority arbitration awarded this week.
Barron’s reports that Morgan Stanley was found liable for negligence by the arbitration panel for allowing the victim, Marjorie Kessler, to make two “large and unusual” withdrawals from her accounts. In the complaint, Kessler claimed that her brokerage advisors should have noted how “uncharacteristic” her requests were and that they didn’t take “reasonable” steps to provide a “trusted contact” for the account, as required by oversight rules.
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The scam involved multiple criminals who pretended to be technical support staffers, employees at the bank, and even government workers. Kessler was told, among other things, that she was the victim of identity theft and would face having her assets frozen. The fraudsters convinced her to make two major withdrawals and convert them into cash, gold bars, and cryptocurrency.
The transactions were placed in July and August 2023, less than two weeks apart, and totaled about one-third of her assets at Morgan Stanley.
In response to the complaint, Morgan Stanley claimed Kessler is “incredibly sharp” and has been managing her money by herself for almost 20 years. The firm says she lied to her advisor, saying she was purchasing two condos, one for herself and one for her newly divorced daughter.
In response to the payment order, Morgan Stanley said in a statement they “sympathize with Ms. Kessler as the victim of a third-party fraud” but noted that “this fraud did not occur at Morgan Stanley.”
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“The firm should not be held responsible for her losses as Ms. Kessler made misstatements to her financial advisor about the purpose of the transfers, and authorized them to be sent to a third-party bank account held in her name,” the statement said.
Kessler’s lawyer Lloyd Schwed, meanwhile, said that Morgan Stanley “ignored multiple red flags” and regular oversight, per 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 said.
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“I am very grateful to the arbitrators for understanding how vulnerable senior investors are to tech support and government impersonation scams,” Schwed continued.
Kessler requested a judgment of $1,744,470 but received less than half of that.
It is not yet clear what, if anything, happened to the scammers.
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