The Securities and Exchange Commission has charged a pair of twin brothers from the New York area with swindling clients out of over $5 million through fraudulent activities, reports Financial Advisor.
The SEC filed a complaint in federal court for the Eastern District of New York against Adam Kaplan and Daniel Kaplan of Great Neck, Long Island. The two were associated as investment adviser representatives with an SEC-registered investment adviser from May 2018 until their termination in July 2021, and after leaving that firm, they continued to act as investment advisers to certain clients.
In the complaint, the SEC stated that the Kaplans overcharged clients for advisory fees by fraudulently inflating the fee amounts in the clients’ advisory agreements without their knowledge. The defendants are also accused of misappropriating clients’ funds by fraudulently applying charges to their clients’ credit card and bank accounts for investments or additional advisory fees to which they were not entitled.
The SEC said the Kaplans used the funds obtained from the scheme for their personal benefit, including trips to luxury hotels and shopping excursions at jewelry and apparel stores. Some of the money was allegedly used to repay clients who began to complain about unusual account activity. The brothers also falsified documents and made Ponzi-like payments to clients to conceal the fraud, the commission said. At least 60 advisory clients were reported to have had their funds misappropriated.
“In total, from at least May of 2018 through at least October of 2022, defendants misappropriated at least $4 million from clients through the electronic charges they fraudulently applied to clients’ credit card and bank accounts,” the SEC said. “Adam Kaplan charged clients at least $2.94 million, and Daniel Kaplan charged clients at least $1.11 million.”
The Kaplan twins, both 35, were charged with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The SEC is seeking injunctions, disgorgement plus prejudgment interest, and civil penalties.
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