Erez Law is interested in speaking with investors who may have suffered losses due to investment losses with former Sterne Agee Financial Services, Inc. financial advisor Dean Mustaphalli (CRD# 2792038) regarding a multi-million dollar securities fraud scheme. Mustaphalli was registered with Sterne Agee Financial Services, Inc. in Forest Hills, New York from December 2009 to September 2011. Previously, Mustaphalli was registered with Citigroup in Jamaica, New York from 2007 to 2009. Most recently, Mustaphalli acted as the owner and operator of Mustaphalli Capital Partners Fund, LP.
In May 2018, the Attorney General of New York indicted Mustaphalli on 99 counts including securities fraud, grand larceny, forgery and scheme to defraud. Mustaphalli faces up to 10 to 20 years in prison. It is alleged that Mustaphalli engaged in a scheme to defraud investors — many of whom were elderly and at or near retirement — out of their savings by investing them in his hedge fund without their knowledge or consent.
According to the Attorney General’s criminal indictment, Mustaphalli’s scheme brought in more than $5 million from 22 victims between June 2014 and March 2017. During this time, Mustaphalli’s hedge fund collapsed, losing 92% of its value, after he made bad bets on the stock market. Victims have only gotten back 20 cents on the dollar of their investments.
“A separate civil lawsuit filed by the Attorney General’s office in June 2017 alleges that Mustaphalli fraudulently solicited an additional $7 million from prior investors between 2012 and 2014. In total, Mustaphalli allegedly fraudulently solicited his former clients to invest over $12 million – and lost over $11 million of their hard-earned money,” according to the attorney general’s office.
Beginning in 2010, Mustaphalli allegedly moved his clients’ assets to a platform that would conceal his risky trading activity, which ended up being a hedge fund run solely by Mustaphalli. Mustaphalli allegedly engaged in extremely high-risk and unauthorized trading strategies, including speculative options trading.
It is alleged that Mustaphalli’s clients had no idea that their retirement monies were being transferred into an extremely high-risk investment, much less to a hedge fund. Mustaphalli also allegedly provided his clients with only the signature pages of fund documents, and forged his client’s initials next to the portion of the documents entitled “Accredited Investor Status,” which falsely stated the investors’ net worth was over $1 million dollars. In fact, many investors had a net worth below $1 million and were living in affordable housing for moderate and middle-income residents. It is a requirement that hedge fund investors meet the definition of an “accredited investor,” a person whose net worth exceeds $1 million.
In December 2014, FINRA sanctioned Mustaphalli to $20,000 in civil and administrative penalties and fines, $41,800 in disgorgement, and suspended him for two years following allegations that during a six-month period, he formed and acted as managing director for a hedge fund through which he sold investments totaling approximately $6 million and received compensation for managing the hedge fund, all without providing prior written notice to or receiving written acknowledgment from his member firm regarding his role as managing director, his planned participation, or his expected compensation. The complaint alleges that as part of FINRA’s investigation, he refused to provide a list of the hedge fund clients or unredacted account statements for the business account he controlled.
Mustaphalli has been the subject of 18 customer complaints between 2011 and 2017, four of which were denied, according to his CRD report. Recent complaints include:
- January 2017. “Claimants allege representative made material misrepresentations and sold them an unsuitable investments.” The customer is seeking $3 million in damages and the case is currently pending.
- December 2016. “Claimant alleges representative made material misrepresentations and sold her an unsuitable investment.” The customer sought $100,000 in damages and the case was settled for $20,000.
- January 2015. “Claimants allege that representative made material misrepresentations and sold them an unsuitable investment in 2011.” The customer sought $400,000 in damages and the case was settled for $125,000.
- June 2014. “Claimant alleges that representative made material misrepresentations and sold her an unsuitable investment in 2010.” The customer sought $500,000 in damages and the case was settled for $105,000.
- June 2014. “Claimant alleges that representative made material misrepresentations and sold him an unsuitable investment in 2010.” The customer sought $600,000 in damages and the case was settled for $230,000.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Sterne Agee Financial Services, Inc. may be liable for investment or other losses suffered by Mustaphalli’s customers.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.