Forest Hills Ex-Broker Swindled Millions From Elderly Clients: AG

FOREST HILLS, QUEENS -- A once-trusted financial advisor to dozens of Queens seniors is now accused of conning his clients out of nearly $11 million in retirement savings after he squandered the money in risky stock market trades.

Dean Mustaphalli, of Forest Hills, faces a 99-count indictment for conning 22 clients into unknowingly investing around $5 million into his hedge fund, where he lost nearly all their savings in high-risk trades from 2014 to 2017, New York Attorney General Barbara Underwood announced Wednesday.

The announcement comes nearly a year after the Attorney General's office filed a civil lawsuit against Mustaphilli last June for allegedly conning elderly investors out of $7 million in a similar scheme from 2012 to 2014. He lost 98 percent his clients' investments in the high-risk trades done behind their back, the lawsuit alleges.

"The charges today are the latest development in a years-long investigation into Mr. Mustaphalli's shady business practices," Underwood said. "All told, dozens of New Yorkers, mostly seniors, invested about $12 million with him and lost around $11 million."

Many of his clients were at or near retirement, and that money represented all the funds they'd saved to live off of, prosecutors said.

"They had played by the rules, putting away a few dollars here and there to make sure they had enough for a relatively comfortable retirement," Underwood said. "They were not big-time investors."

Mustaphalli allegedly began his scheme in 2010 when he left his job as a broker at a Jamaica Citibank to open his own hedge fund, Mustaphalli Capital Partners Fund, in Forest Hills.

When he told clients he was leaving the bank to start his own business, many of them - most of whom were inexperienced investors - followed him.

"They liked Mr. M and they trusted him, and he took advantage of that trust," Underwood said.

Despite his clients wishes to invest conservatively, Mustaphalli allegedly put their $7.1 million into his hedge fund, where he made "extremely aggressive and highly-risky" trades between 2012 and 2014 until only $200,000 remained.

Rather than stop after the devastating loss, Mustaphalli doubled down, prosecutors said.

By May 2015, he'd allegedly recruited 22 more investors - many of them elderly former clients who trusted him - to put $5 million of their savings into what they didn't know was an extremely high-risk hedge fund, according to the complaint.

Along with forging documents and using fake emails to open their accounts, Mustaphalli allegedly went so far as to give clients only the signature pages of their investment contract to keep them in the dark.

When a signature was needed to verify his clients' as "Accredited Investors" with a net worth over $1 million, Mustaphalli simply forged it - despite almost none of his clients having the required amount of money, prosecutors said.

By December 2015, Mustaphalli had again squandered more than $4 million of his clients' investments in risky stock market trades, costing most of his clients their retirement savings, according to the criminal complaint.

"Investments ranged from tens of thousands to hundreds of thousands, but each incident represented a majority of the investor's savings," said Stephanie Swenton, head of the Criminal Enforcement and Financial Crimes Bureau.

In the aftermath of yet another loss, Mustaphalli allegedly tried to keep $100,000 of the funds left for himself by diverting the money into shell companies he'd created, according to the criminal complaint.

Mustaphalli was arraigned in Queens County Supreme Court on Tuesday on charges including grand larceny, forgery and securities fraud. A judge set his bail at $2 million cash or bond and ordered him to hand over any travel documents.

If convicted, he faces up to 20 years in prison.

As for the dozens of clients he allegedly bilked, most have only gotten a small amount back - 20 cents per dollar - of the life savings they invested, Underwood said. The rest would have to come from a civil judgement, which she said her office will seek.

"The funds have mostly been depleted," she said.

(Lead photo via Shutterstock)