New York Attorney General Eric T. Schneiderman announced charges Wednesday against an investment advisor in the state and several entities he controlled with defrauding elderly clients out of millions of dollars.
The lawsuit against Dean Mustaphalli — who was suspended from the securities industry — was filed in New York’s Supreme Court. The suit alleges that he engaged in a six-year scheme to defraud clients that were elderly and at or near retirement by investing their money in his hedge fund — without their knowledge and against their interest — that engaged in highly speculative and risky trading.
“It is shameful to rip off elderly New Yorkers who are trying to plan for retirement,” Schneiderman said in a statement. “As we allege, Dean Mustaphalli squandered and looted $10 million from hardworking individuals. New Yorkers deserve to know that their investments are safe — and financial professionals who won’t play by the rules will face consequences.”
The entities Mustaphalli controlled were Mustaphalli Capital Partners Fund L.P.; Mustaphalli Advisory Group LLC; Mustaphalli Capital Management LLC; Mustaphalli Group LLC; LSA Quant Research LLC, L & S, LLC; and Camelot Cricket Club Inc.
The lawsuit alleges that since 2011, Mustaphalli caused 58 New York investors to invest a total of more than $11 million in his hedge fund, $10 million of which was lost by engaging in a highly risky trading strategy that was not consistent with his clients’ investment profiles and objectives.
Mustaphalli’s scheme “targeted elderly New Yorkers who had been his clients for many years, who had already hired him as their investment advisor, and who had already given him control of trading in their investment accounts,” the complaint states.
As their investment advisor, Mustaphalli “knew that these investors had relatively conservative investment needs. In fact, Mustaphalli had approximately 10 years of experience providing financial services to these clients using conventional investment products like annuities, mutual funds and exchange-traded funds,” the complaint states.
Schneiderman also alleges that Mustaphalli took an additional $100,000 from his hedge fund to pay for his own personal expenses.