As more and more renewable and distributed energy sources are connected to the grid, the static synchronous compensator (STATCOM) plays an important role in power system to increase the power factor and regulate the load voltage. In general cases, these STATCOM systems are required to install at the medium voltage level (1kV to 50kV) and regulated for the high reliability. Thus, the modular multilevel cascaded converters are applicable to these requirements. This paper provides a zero sequence voltage injection, so called neutral point shift, for fault tolerant operation as the module of bridge cell is broken. The limit of zero sequence voltage injection and the proposed phase/clustered voltage balancing control are also introduced in this paper. The control algorithm is applied with a 7-level star-connected cascaded converter and test results verify the proposed fault tolerant operation and phase/clustered voltage balancing control.