Forest Hills Investment Adviser Convicted Of $11M Fraud Scheme

FOREST HILLS, QUEENS — A Forest Hills investment adviser was sentenced to three to nine years in prison for defrauding elderly investors out of $11 million in life savings, the New York Attorney General's Office announced Friday.

Dean Mustaphalli pleaded guilty to 22 felony charges, including securities fraud and grand larceny, that he squandered his clients' retirement savings on his hedge fund's risky investments without their knowledge or consent, according to a news release.

Mustaphalli is now permanently barred from engaging in any business related to issuing or selling securities in New York.

“Dean Mustaphalli stripped numerous New Yorkers of their independence and security when he invested millions from their retirements in high-risk ventures without their consent,” New York Attorney General Letitia James said in a statement. “In just four years, Mustaphalli’s massive fraud drove immigrants and individuals nearing retirement into the poorhouse and left them with
pennies on the dollar, forcing many back into the workforce."

The scheme primarily targeted elderly New Yorkers, most of whom were immigrants or women who had little investment experience and were planning for retirement, according to the attorney general's office.

From 2011 to 2016, he transferred the savings of 50 clients to his now-defunct hedge fund, Mustaphalli Capital Partners Fund, then used the money in a series of high-risk investments.

In one instance, Mustaphalli bet $2.5 million on the volatility of the price of Mastercard stock and ended up losing more than $2 million, the attorney general's office said.

He was arrested in 2018 and indicted on 99 charges of securities fraud, grand larceny, forgery and other crimes.

Two of his victims have since died. Others have had to re-enter the workforce or rely on their children for financial support while weathering the economic devastation of the coronavirus pandemic.

Mustaphalli has paid $260,000 in criminal restitution and agreed to more than $8 million in judgments in favor of his victims.