A former investment adviser has admitted to a years-long scheme in which he kept winning trades for himself and dumped the losers on his own clients. William Carlton pleaded guilty to a cherry-picking scheme, according to the U.S. Attorney's Office for the Southern District of New York, which announced the plea in a post from its account.
“Investment advisers are required to act with integrity and put their clients' interests ahead of their own,” U.S. Attorney Jamie McDonald said, as posted by the US Attorney SDNY
. “William Carlton instead admitted to systematically steering profitable trades to himself while leaving losing trades for his clients,” McDonald said. The post identified Carlton as a former investment adviser and described the case as a cherry-picking scheme, tagging the New York FBI in its announcement.
The criminal admission echoes civil allegations the Securities and Exchange Commission previously brought against Carlton. According to WealthManagement.com, the SEC alleged that Carlton and Hillsborough, N.J. advisor Hans Hernandez ran separate, multi-year cherry-picking schemes that defrauded investors.
How the Alleged Scheme Worked
Starting in 2015, Carlton began purchasing securities through a personal account he co-held with his wife and through an account called Carlton Wealth Management, the outlet's report states. From there, the pattern was simple but costly for clients: if a security's price rose, Carlton would sell it the same day and keep the profit for himself. If the price fell instead, he would often call his brokerage late in the day and direct that some or all of the losing trades be allocated to his clients' accounts, per the same account.
The SEC said that approach generated approximately $5.3 million in profits for Carlton, while his clients were left holding mostly unrealized losses totaling more than $6.4 million, the report notes. That gap between what Carlton earned and what his clients lost formed the core of the regulator's civil case against him.
A Career That Spanned Two Firms
Carlton was originally affiliated with First Allied Advisory Services from July 2012 through November 2020 before joining Cetera, where he remained until he was fired in late 2023, according to the same WealthManagement.com report. Cetera itself moved to curb Carlton's activity well before his termination — in September 2022, the firm prohibited him from placing trades in his own accounts and later allocating them to clients.
The effect of that internal restriction was notable: once Cetera cut off Carlton's ability to shift losing trades onto client accounts, those accounts' first-day results turned positive in eight of the following 16 months, the outlet reported. That shift stands as one of the clearest indicators cited in the case of how the alleged scheme had been skewing outcomes in Carlton's favor.
The federal guilty plea announced by the U.S. Attorney's Office marks a new chapter in a case that first drew scrutiny through the SEC's civil allegations. Prosecutors' statement, delivered through McDonald, frames the admission as a violation of the basic duty advisers owe their clients: to act with integrity and put those clients' interests ahead of their own.
