In many ways, launching and running a fraudulent hedge fund is almost as much work as launching and running a real one. You have to create a bogus fund, pitch clients, stress over fake performance reports, make fake filings with the SEC, occasionally play a game of catch with some freezer-burned documents, cut redemption checks (albeit using other clients’ money), the whole thing. Most of them even invest some of the money, generally losing it, in addition to stealing. Gregg Caplitz of Woburn, Mass., decided he didn’t want to put up with that whole rigmarole. And why should he? He had already established himself as a money manager. So he just told some clients that he had started a hedge fund—which he had not, not even a fake one—and that they should invest in it. Some of them did, occasionally against their will, and Caplitz did invest it: In his chief investment officer, who in turn invested it in her children, who in turn invested it in gas, toiletries and dinner—all $1.3 million of it. And now, he’s getting his return on that investment.
A Massachusetts man who defrauded clients out of $1.3 million by convincing them to invest in a hedge fund that didn’t exist has been sentenced to three and a half years in prison.
Federal prosecutors say 57-year-old Gregg Caplitz, of Woburn, was also sentenced Tuesday to three years of probation and ordered to pay restitution.
Man sentenced for pitching hedge fund that didn’t exist [AP via Seattle Times]