Former Investment Adviser Pleads Guilty To Cherry-Picking Scheme

United States Attorney for the Southern District of New York, Jamie McDonald, and Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), James C. Barnacle, Jr., announced today that WILLIAM CARLTON has been charged and pled guilty to securities fraud for his role in a scheme to defraud his investment advisory clients by “cherry picking,” systematically allocating profitable trades to himself and allocating unprofitable trades to his clients. Through this conduct, CARLTON gained millions of dollars at the expense of his clients. CARLTON pled guilty today before Magistrate Judge Ona T. Wang and is scheduled to be sentenced by U.S. District Judge Richard M. Berman on January 27, 2027.

“Investment advisers are required to act with integrity and put their clients’ interests ahead of their own,” said U.S. Attorney Jamie McDonald. “William Carlton instead admitted to systematically steering profitable trades to himself while leaving losing trades for his clients. Today’s guilty plea holds him accountable for abusing that trust for personal gain.”

“William Carlton initially denied wrongdoing but later pled guilty to cherry‑picking profitable trades for himself and dumping poor‑performing trades on his clients,” said FBI Assistant Director in Charge James C. Barnacle, Jr. “Those clients trusted him to act in their best interest, and the FBI worked diligently to uncover his scheme and prevent further harm. The FBI remains committed to exposing financial-sector misconduct and upholding trust and integrity in the markets.”

According to the Information:

CARLTON served as an investment adviser to more than 50 clients every year. As an adviser, CARLTON managed his clients’ trading accounts and had the authority to buy and sell securities for those managed accounts. CARLTON owed his clients a fiduciary duty, including the duty to act in their best interests and to refrain from disadvantaging his clients in favor of his own personal trading.

From at least in or about January 2015, up to and including at least in or about August 2022, CARLTON engaged in cherry-picking, systematically assigning profitable trades to himself and unprofitable trades to his clients. CARLTON would purchase securities in his personal trading account and observe price movements during the trading day. When the price of a stock increased over the course of the day, CARLTON typically sold the stock the same day and kept the profits for himself. By contrast, when the price of a stock decreased over the course of the day, CARLTON typically assigned the stock to his clients’ accounts. As a result of CARLTON’s scheme, approximately 70% of the trades CARLTON assigned to his own accounts experienced same-day gains. At the same time, only approximately 16% of the trades CARLTON assigned to his clients’ accounts experienced same-day gains. Conversely, as a result of CARLTON’s scheme, only approximately 30% of the trades CARLTON assigned to his own accounts experienced same-day losses. At the same time, approximately 84% of the trades CARLTON assigned to his clients’ accounts experienced same-day losses. Through his cherry-picking scheme, CARLTON realized ill-gotten gains of approximately $6 million, while imposing losses on many of his clients.

When confronted by the United States Securities and Exchange Commission about his conduct, CARLTON falsely denied that he had ever made trades in his personal account and later reassigned them to his clients’ accounts, claiming instead that he placed all client trades individually and directly in each client’s account. That statement was false and misleading.

*                *                *

CARLTON, 66, of Seattle, Washington, pled guilty to securities fraud, which carries a maximum sentence of 20 years in prison. CARLTON will also be subject to forfeiture and restitution at the time of sentencing.

The maximum potential sentence in this case is prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. McDonald thanked the FBI for its outstanding work. Mr. McDonald also expressed appreciation for the assistance of the U.S. Securities and Exchange Commission.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Marguerite B. Colson, Peter Davis, and Daniel G. Nessim are in charge of the prosecution.