Mustaphalli Capital Partners Fund Losses.
The Mustaphalli Capital Partners Fund (“Mustaphalli Fund”) suffered a staggering 97% loss recently. Are you one of the unfortunate investors who suffered an investment loss in the Mustaphalli Fund through Dean Sadrudin Mustaphalli? If the answer is yes, you may have an arbitration claim against Mustaphalli or his former employers, Sterne Agee Financial Services, Inc. and/or Citigroup Global Markets, Inc.
Dean Sadrudin Mustaphalli (“Mustaphalli”) was the owner of Mustaphalli Advisory Group (“MAG”), a registered investment advisor located in Forest Hills, New York, and advisor to the Mustaphalli Fund. The Mustaphalli Fund was registered with the Securities Exchange Commission (S.E.C.) as a Regulation D offering, meaning the investment was private and exempt from registration.
Mustaphalli recommended the Mustaphalli Fund to investors as a safe and reliable investment. Indeed, Mustaphalli represented to investors that the Mustaphalli Fund provided downside protection and limited losses:
"…the profitability of a trading strategy that focuses on credit spreads on a futures/equity contract depends upon the underlying price movement of such futures contract. In credit spreads, the loss is limited to the amount of the difference between the strike prices of the two options in the spread."
However, Mustaphalli’s representations could not be further from the truth. In reality, the option spread strategy Mustaphalli implemented in the Mustaphalli Fund was complex and incredibly risky – as evidenced by the whopping 97% decline suffered by investors. The Mustaphalli Fund utilized a credit spread strategy, which is an alternative option writing strategy that involves selling an option at a greater premium than the cost of the option that is purchased, thereby creating a credit to the trader writing the spread.
During the relevant time period (December 2009 to the present), Mustaphalli was also employed by Citigroup Global Markets, Inc. (“CGMI”) from May 2007 until December 2009, and worked for Sterne Agee Financial Services, Inc. (“Sterne Agee”) from December 2009 until September 2011. Mustaphalli has at least 13 customer claims against him and at least two FINRA investigations.
On March 21, 2014, the Financial Industry Authority (“FINRA”) submitted a Wells Notice against Mustaphalli in order to determine whether formal disciplinary proceedings should be brought against Mustaphalli for potential violations of NASD Rule 3040, as well as FINRA Rules 2010 and 8210. NASD Rule 3040 prohibits associated persons from transacting business outside of the member firm. FINRA Rule 2010 requires members to “observe high standards of commercial honor and just and equitable principles of trade.”
Mustaphalli’s alleged misconduct can give rise to several theories of recovery depending upon the specific facts of each investor’s situation, including but not limited to, misappropriation of customer funds, misrepresentation and omissions, fraud, and unsuitable investment recommendations. Moreover, Sterne Agee and CGMI may be held liable for Mustaphalli’s alleged misconduct and failure to supervise because they were each his employer during the relevant time period.
Lufrano Law, LLC is a national securities litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. If you have any questions regarding Mustaphalli’s misconduct, or if you suffered losses investing in the Mustaphalli Fund, please contact us today for a free, commitment consultation.
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