DOJ Charges Advisors Who Sued Trump Attorney With $5M Fraud
Practice Management>Regulation & Compliance DOJ Charges Advisors Who Sued Trump Attorney With $5M Fraud Adam and Daniel Kaplan were charged with wire and investment fraud and money laundering for misappropriating at least $5 million from dozens of clients, many of whom were elderly or disabled. A pair of investment advisor brothers face up to 20 years in prison after the Justice Department charged them with wire and investment fraud, as well as money laundering.
Adam and Daniel Kaplan were arrested and arraigned Tuesday, and the charges come as they are embroiled in a lawsuit with attorney Todd Blanche, an attorney for former U.S. President Donald Trump, for malpractice.
According to the DOJ, the Kaplan brothers defrauded dozens of clients out of at least $5 million between 2018 and 2022, when they were both advisors at the New York-based RIA IHT Wealth Management. FBI acting Assistant Director Christie Curtis said many of the victims were elderly or disabled.
“This type of illegal activity is unfortunately all too common and even more egregious when vulnerable groups are targeted,” she said.
Both Adam Kaplan and Daniel Kaplan spent a little under a year at Morgan Stanley and Merrill before landing at IHT, according to their IAPD pages.
At IHT, their clients paid advisory fees based on their amount of managed assets, generally on a quarterly basis out of their brokerage accounts. The Kaplans would allegedly agree to a 1% fee but would have investors sign advisory agreements with the fee section kept blank, later filling in a higher percentage (often exceeding 2%).
The duo also convinced clients to give them access to their credit card information and brokerage and bank accounts, taking money from these sources for their own personal expenses, such as luxury items, according to the DOJ. If clients asked, the brothers would tell them the charges were for advisory fees (even though they’d already been charged).
But some clients noticed the discrepancies, and contacted fraud departments at their banks to dispute the withdrawals. In response, the brothers allegedly fabricated documents showing clients agreeing to the disputed charges, going as far as forging signatures, according to the DOJ.
Their plan seemed to work, and the banks denied the fraud claims from the investors, but both Adam and Daniel Kaplan were fired in July 2021, after a customer complained their advisory fee was between 2.5% and 3% after they’d agreed to 1%.
The Kaplans had also been fired from Morgan Stanley in 2018 for “conduct involving utilizing client logon credentials to access client accounts,” according to their IAPD pages (an attorney for Adam Kaplan did not return a request for comment as of publication).
In March, the SEC charged both brothers for the alleged fraud the DOJ cited in its indictment. During an SEC investigation that spanned about 15 months, the Kaplans were represented by Todd Blanche, who is currently representing Trump in a number of pending cases.
Among them are the charges from New York District Attorney Alvin Bragg for the former president's involvement in a scheme to reimburse a payment made to porn star Stormy Daniels during the 2016 election and federal charges related to allegedly illegally holding onto numerous classified documents after losing the 2020 election.
According to the ABA Journal, the brothers sued Blanche for malpractice, accusing him of forging their signatures on a retainer agreement and claiming he “recklessly or intentionally sabotaged the entire representation by prejudging the Kaplans’ standing” with the SEC during the investigation.
According to the Kaplans’ suit, Blanche and his firm billed the brothers for about $2.4 million, but in November 2022, decided to stop representing them, claiming they failed to pay invoices; the Kaplans said they hadn’t paid because they had questions about the fees, and wanted a more detailed breakdown, according to their lawsuit.
After Blanche quit representing them, the Kaplans said he’d refused to forward the brothers files on the case, had accepted subpoenas from the SEC without sending them to the brothers and “defamed” the duo to other parties, including lawyers who the Kaplans sought to represent them after Blanche allegedly quit.
In a separate lawsuit, the Kaplans also sued the law firm Conway & Conway after it didn’t pay $45,000 in legal fees, though that suit ended in August of last year, according to the ABA Journal.
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Originally posted on: https://www.wealthmanagement.com/regulation-compliance/doj-charges-advisors-who-sued-trump-attorney-5m-fraud