Investment adviser charged in elderly fraud scheme: AG

Investment adviser charged in elderly fraud scheme: AG
Courtesy of attorney general’s office
By Naeisha Rose

Dean Mustaphalli, an investment adviser, was charged last week with securities fraud, grand larceny, forgery and scheming to defraud 22 of his elderly and near retirement-aged clients of nearly $5 million of their savings, according to state Attorney General Barbara Underwood.

In the 99-count criminal indictment Mustaphalli was accused of targeting elderly persons and individuals near retirement in order to place their money in a hedge fund through his firm, Mustaphalli Capital Partners Funds, which was owned and run by him, and make risky investments without their knowledge.

Mustaphalli Capital Partners Funds is at 108-18 Queens Blvd. in Forest Hills.

Mustaphalli’s bail was set at $2 million cash or bond, he was ordered to surrender travel documents and if convicted could face anywhere between 10 to 20 years in prison, according to Queens Supreme Criminal Court Judge Douglas Wong.

Mustaphalli allegedly attracted his clients, mostly southeast Queens’ residents from Mitchell-Lama Cooperative, an affordable housing complex in Rochdale Village, to his firm from June 2014 to March 2017, knowing they had little to no experience in investing, according to the criminal complaint. He allegedly took their retirement savings to make high-risk hedge fund investments without the retirees’ or near retirees’ consent instead and allegedly ignored the agreed-upon conservative investments they requested.

An investigator and forensic auditors working with the attorney general’s office discovered Mustaphalli allegedly created fake e-mails to submit forged documents to transfer his clients’ savings from his firm to the hedge fund, even those that did not even own or know how to operate a computer, the AG said.

His clients did not know what was going on because in order for him to further his scheme he provided them with signature pages of fund documents and would later forge their initials on Accredited Investor Status forms, which falsely stated the retirees had a net worth over $1 million – a requirement an investor must have to invest in a hedge fund, according to the criminal complaint.

Almost none of his clients had such a large net worth, especially the residents in the housing complex in Rochdale Village, according to the complaint.

“New Yorkers should be able to trust the people they turn to for investment advice, said Underwood. “Yet, as we allege, Dean Mustaphalli deceived the clients that trusted him – looting and squandering millions from senior New Yorkers who relied on those savings.”

The Mitchell-Lama residents were low-to-middle income residents, according to the attorney general’s office.

In 2015, unauthorized trading strategies and speculative options trading caused the investments made before December of that year to lose 80 percent of their value, according to the criminal complaint.

Eventually, almost all or most of his clients’ retirement savings were lost, and he blamed the losses on “oil, bad markets, and the [2016] election,” as well as “Brexit” and he told one investor that “if Hillary [Clinton] wins, you’ll get your money back,” according to the complaint.

After the nearly $5 million loss, the defendant diverted $100,000 into shell companies to himself, leaving the few investors who still have funds in his firm 20 percent of what they originally entrusted to him, according to the complaint..

He is being prosecuted under the The Martin Act, an expansive law that passed in 1921 that gives the attorney general powers to conduct investigations into securities fraud and bring civil or criminal actions against the violators of those laws, according Practical Law The Journal, a New York Litigation guide.

Reach reporter Naeisha Rose by e-mail at nrose@cnglocal.com or by phone at (718) 260–4573.