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Ex-FA Indicted Over Alleged $12 Million Fraud

June 1, 2018

A former New York investment advisor is facing a 99-count indictment accusing him of fraudulently soliciting over $12 million from clients and losing more than $11 million of it, the Wall Street Journal writes.

From 2012 through March 2017, Dean Mustaphalli allegedly invested his clients’ money in his hedge fund without their knowledge, and when the losses started to add up he blamed it on Brexit, “oil, bad markets and the election,” the New York attorney general’s office said, according to the Journal. Mustaphalli also allegedly told one investor prior to Nov. 8, 2016, that they would get their money back if Hillary Clinton won the election, the paper writes, citing the attorney general’s office.

Mustaphalli’s clients included municipal workers, nurses and homemakers, state Attorney General Barbara Underwood said at a news conference Wednesday, according to the Journal. Mustaphalli allegedly met the clients when he worked at a bank branch in Queens and then took them with him when he launched his own firm, the paper writes, citing Underwood. He then put their money into his own hedge fund without notifying them and forged their initials on several documents to do so, prosecutors said, according to the Journal. The fund lost 92% of its value within about a year, the paper writes, citing the attorney general’s office.

The former advisor, who’s been in the financial services industry since 1996, according to BrokerCheck, pleaded not guilty in state Supreme Court in Queens on Tuesday, according to court records cited by the Journal. Among the charges Mustaphalli is facing are grand larceny, forgery and securities fraud, the paper writes. As a result, he could face up to 20 years in prison, the attorney general’s office said, according to the Journal.

Separately, the SEC has charged a former registered representative with running an $8 million scam targeting his brokerage clients, including retirees, according to a press release from the regulator.

Steven Pagartanis allegedly told some investors he would invest their money in a publicly-traded or private land development company and guaranteed them monthly interest payments, the SEC says, citing a complaint filed in federal district court in Brooklyn. The investors’ checks, however, were payable to a similarly-named entity that was actually “secretly controlled” by Pagartanis, the regulator alleges.

(Getty)

Pagartanis then used the funds to cover personal expenses and the guaranteed interest payments, according to the SEC. He also allegedly created bogus account statements to conceal the fraud, the regulator claims. The SEC is seeking disgorgement of ill-gotten gains plus interest and financial penalties, according to the press release.

In addition, Pagartanis is facing criminal charges filed by the Suffolk County District Attorney’s Office, the SEC says.

By Alex Padalka
  • To read the Wall Street Journal article cited in this story, click here.