Brian Raymond Callahan was arrested Thursday morning at the Old Westbury home of his father in law.
His brother in law, Adam Manson, was taken into custody at his Manhattan apartment building, the Savoy.
They were both charged with multiple counts of securities fraud and wire fraud.
Callahan is also charged with two counts of aggravated identity theft.
Callahan is accused of using about $100 million in investor money to fund his brother-in-law's private real estate project, which was facing foreclosure.
He also allegedly used the money, from 24 investors, to buy a $3.35 million beach house on Long Island.
Prosecutors say Callahan told the investors he would put their money into hedge funds, including those run by Morgan Stanley.
But they say Callahan didn't tell his clients that he was barred in 2009 from associating with any member of the Financial Industry Regulatory Authority, according to the SEC.
In an SEC complaint filed last year, Callahan was alleged to have taken money for at least five offshore funds he ran.
The investors included a California teacher who gave $270,000 and a small-business owner in Kentucky who gave $2.9 million, the SEC said.
Callahan is currently unemployed.
Manson is running his company, Distinctive Ventures, in Great Neck.