A long time registered representative began misappropriating client funds in 2009 and funneling them to his business partner, her two sons and the wife of one son, according to the SEC. The scheme involved about twelve investors and an estimated $1.1 million. The Commission obtained a freeze order when filing its complaint. SEC v. Caplitz (D. Mass. Filed March 18, 2013).

Defendant Gregg Caplitz has been providing business and investment advice to individuals and small business clients for at least twenty year. He is a registered representative at a brokerage firm. Defendant Insight Onsite Strategic Management, LLC is a registered investment adviser. Mr. Caplitz is the CFO. There are five relief defendants: Rosalind Herman, the Chief Investment Officer of Insight Onsight and a managing member of its sole shareholder, Financial Family Holdings, LLC; Brian and Brad Herman, sons of Rosalind; Charlene Herman, wife of Brian Herman; and The Knew Finance Experts, Inc., a corporation controlled by the Hermans.

After years of furnishing business and financial advice to clients, Mr. Caplitz began soliciting investments in Insight Onsite Fund and/or Insight Onsite Partners, an entity that he represented would own and manage the Insight Onsight Fund. The Fund had more than $100 million in assets under management held by a third party, according to its most recent form ADV dated June 29, 2012 and signed by Ms. Herman.

At least two of the dozen persons who invested in the Insight Onsight fund were investment advisory clients of Mr. Caplitz. In one case Mr. Caplitz induced a client to wire $175,000 to Knew Finance. The money was supposed to generate returns of about $1,000 per month. The client was shown spread sheets regarding the investment. In fact the money was dissipated on the personal expenses of the Hermans.

In another instance a client was induced to wire $100,000 to Knew Finance. Again, the money was not invested as promised. The money was spend on expenses of Mr. Caplitz and the Hermans. When a third client rejected the proposed investment as to risky, Mr. Caplitz transferred money from the retirement account of the person to Insight Onsight without permission. Much of the money was dissipated by the Hermans.

Despite the claims of the ADV, the complaint alleges that the Insight Onsight Fund does not have any assets. Likewise, Insight Onsight Partners has not engaged in legitimate business activities in its role as the general partner of the Insight Onsight Fund, according to the Commission.

Finally, in June 2011 Mr. Caplitz is alleged to have obtained $135,000 from a public non-traded Real Estate Investment Trust or REIT. Mr. Caplitz told the President of the REIT that he operated a hedge fund which was considering a $5 million in the fund. Before making the investment, however, he needed $135,000 to conduct the necessary due diligence. Following receipt of the funds no due diligence was conducted. Rather, the money was diverted to the personal use of Mr. Caplitz and the Hermans.

The Commission’s complaint alleges violations of Securities Act Section 17(a), Exchange Act Section 10(b) and Advisers Act Sections 206(1) and (2). The case is in litigation. Mr. Caplitz and Ms. Herman were previously indicted on criminal tax charges in, respectively, Massachusetts and Nevada.