Dean Mustaphalli, a former investment adviser, is facing a 99-count indictment for allegedly operating a securities fraud scheme that duped dozens of clients, many of whom were elderly or near retirement.
New York Attorney General Barbara Underwood announced the charges — which include 18 counts of grand larceny in the second degree, 12 counts of forgery in the second degree and 21 counts of securities fraud. Mustaphalli allegedly diverted clients' savings from relatively safe investment portfolios to his hedge fund without their knowledge or consent. Mustaphalli Capital Partners Fund LP then collapsed, losing 92% of its value.
According to the indictment, Mustaphalli fraudulently solicited more than $12 million from clients, then lost more than $11 million of their money. Specifically, Mustaphalli defrauded 22 clients of more than $5 million between June 2014 and March 2017. A separate civil lawsuit the attorney general filed in June 2017 claims that an additional $7 million from prior investors were also fraudulently solicited. If convicted, Mustaphalli faces up to 10 to 20 years in prison.
According to FINRA's BrokerCheck website, a total of 18 customer disputes were filed against Mustaphalli from April 2001 to January 2017. FINRA also suspended Mustaphalli in 2014, and ordered him to pay a $20,000 civil and administrative penalty and a $41,800 disgorgement.
