For years, a Queens banker claimed to be working with mostly elderly clients on conservative investments in their retirements while allegedly pouring some $12 million of their money into a high-risk, failing hedge fund, state prosecutors said.
Attorney General Barbara Underwood announced Wednesday that the banker, Dean Mustaphalli, 48, had been indicted on 99 criminal counts, including grand larceny, forgery and securities fraud.
Mustaphalli lied to at least 58 investors while soliciting more than $12 million between 2012 and 2017, according to one criminal and a second civil case brought by the attorney general’s office. His fund wound up losing $11 million, and the victims have only been able to recoup about 20 cents for every dollar invested, she said.
“They played by the rules, putting dollars away here and there to save enough money for retirement,” Underwood said.
The attorney general said Mustaphalli cultivated a clientele base while working as an investment specialist at a Jamaica Citibank branch. He left in 2009, following an internal investigation by the bank, according to the attorney general’s office.
About a year later, Mustaphalli formed his own hedge fund called Mustaphalli Capital Partners Fund LP and brought along many of his clients by claiming it would be a “better” place for their savings, according to Underwood.
He collected $7.1 million in investments for the fund, but allegedly failed to disclose how risky the fund was. Once of his trade moves — betting $2.5 million on the volatility of the price of MasterCard stock — wound up losing his clients more than $2 million alone, according to the civil complaint.
By 2015, Mustaphalli’s fund took on 22 additional clients — who were also seniors — who collectively invested $5 million, the criminal indictment said. During this process, he allegedly forged clients’ initials and inaccurately indicated their savings were worth more than $1 million, according to Underwood. In reality, most victims had more modest savings of between “tens of thousands and hundreds of thousands of dollars,” according to Underwood’s office.
Mustaphalli never discussed the details of the documents with his clients, according to Underwood.
“He allegedly only showed his investors the signature page,” Underwood said.
By the end of 2015, the fund had lost 80 percent of its value. Amid its struggles, Mustaphalli allegedly diverted $100,000 of the fund’s balance to himself through a network of shell companies, the attorney general said.
So far, Underwood said authorities have been able to help victims recover about 20 cents for every dollar they invested in the fund.
She said her team hopes they can regain more of the savings through the civil lawsuit against Mustaphalli.
“The lesson here is clear — if you deceive your investors, we will go after you,” Underwood said.