SEC charges former advisors with stealing $5 million from clients

The SEC has charged two former investment advisors with misappropriating more than $5 million from 60 clients over the course of four years.

In a complaint filed Friday in a Brooklyn federal court, the Securities and Exchange Commission alleged that Adam S. Kaplan and Daniel E. Kaplan fraudulently inflated the advisory fees they charged clients and fraudulently applied charges to their clients’ credit card and bank accounts.

The Kaplans, who are identical twins, worked as investment adviser representatives for an advisory firm from May 2018 until they were fired in July 2021. They held themselves out as the “New York directors” for the firm, which is based in Chicago.

The SEC did not name the firm in its complaint. The Kaplans worked at IHT Wealth Management from 2018 to 2021 and at Global Assets Advisory for a time in 2021. They were affiliated with Morgan Stanley and Merrill Lynch for less than a year each in 2017-18.

The brothers worked as co-IARs for their clients, many of whom provided the Kaplans with credentials to access their personal bank accounts and their advisory accounts custodied at brokerages. The clients also gave the brothers their personal credit card information.

While they were at the firm, the Kaplans overbilled at least 54 clients $540,000 in advisory fees, the SEC alleged. IHT Wealth Management dismissed them in July 2021 after a complaint from one of their clients about excessive fees, according to the Investment Adviser Public Disclosure database.

The SEC also alleges that from May 2018 through October 2022, the Kaplans misappropriated at least $4.5 million from clients through fraudulent charges to their credit cards and bank accounts.

“Defendants used the funds they misappropriated for their personal benefits — including charges at luxury hotels, jewelry stores and luxury apparel companies — and to make Ponzi-like payments to other clients who complained about their misconduct,” the SEC complaint states.

The SEC is seeking a permanent injunction against the brothers, disgorgement of their ill-gotten gains and civil monetary penalties. The agency has asked for a  jury trial.

An attorney for the Kaplans denied the SEC’s allegations.

“The charges are overblown and patently false,” said Vincent Ancona, a partner at Ancona Associates Attorneys. “The Kaplans look forward to mounting a vigorous defense and showing their innocence in any allegations made against them.”

Adam and Daniel Kaplan, who are residents of Great Neck, New York, and Miami Beach, Florida, are no longer registered as advisors or registered representatives, according to the IAPD and BrokerCheck databases.

After leaving the Chicago-based firm, the two continued to serve some of their clients. They built a client base of about 277 from 2016 through July 2021 while working at several advisory firms. Many of their clients moved with them from firm to firm.