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Post date: February 9 2015

A.G. Schneiderman Announces Arrest And Indictment Of New Jersey Broker In $1 Million Securities Fraud Case

Khawaja Saud Masud Charged With Grand Larceny And Securities Fraud For Fraudulently Soliciting Investment In His Purported Hedge Fund

Masud Promised To Conservatively Invest The Victims’ Retirement Monies, But Instead Incurred Losses Of Almost $1 Million In Just Three Months

Schniederman: My Office Will Hold Brokers Who Commit Securities Fraud Accountable

WESTCHESTER - Attorney General Eric T. Schneiderman announced today felony charges against Khawaja Saud Masud, 37, of Jersey City, NJ, for stealing over $1 million from a retired pediatrician and his wife by fraudulently soliciting them to invest in his purported hedge fund, RKS Capital, LP. The defendant is charged with Grand Larceny in the First Degree (a Class B felony) and Securities Fraud under the Martin Act (a Class E felony) and faces up to 25 years in prison.

“The defendant allegedly convinced his victims to turn over their retirement savings with promises of a safe, lucrative investment, only to squander their hard-earned dollars,” said Attorney General Schneiderman. “New Yorkers should be able to rely on brokers to invest their money as promised. My office will hold brokers who fraudulently solicit investors and commit securities fraud accountable.”

According to the indictment and statements made by prosecutors at arraignment, in 2012, Masud allegedly solicited Dr. Kalim Irfani, a 75-year old retired pediatrician, and his wife, Rehana Irfani, of Westchester, to invest their retirement monies in his purported hedge fund, RKS Capital, LP, which Masud had created just two weeks earlier. Based on his promises of a secure investment opportunity, the Irfanis allegedly gave over $1 million to Masud, only to have Masud lose nearly their entire investment in a matter of months.

Prosecutors allege that Masud induced the Irfanis to invest with him by falsely representing that his purported hedge fund was a far safer investment than a mutual fund. Masud also allegedly promised to use a conservative strategy that would preserve their $1 million investment, while also earning a high rate of return. Masud further assured the Irfanis that they would be able to track their investment through monthly reports that would be sent to them from an objective third party administrator.

According to statements made by prosecutors at arraignment, contrary to his representations, Masud allegedly engaged in highly speculative and aggressive trading with the Irfanis’ money. Prosecutors further allege that just one day after his first trade, to conceal his unauthorized activity, Masud cancelled the services of the third party administrator responsible for reporting his trading activity to the Irfanis. Masud allegedly then continued to trade stocks multiple times a day without the Irfanis’ knowledge or permission, suffering staggering losses.

Masud is alleged to have ultimately lost almost $1 million of the Irfanis’ investment in less than three months. According to prosecutors, Masud evaded the Irfanis repeated inquiries about the status of their investment for almost a year, before ultimately admitting to the amount lost.

According to his website, Masud is a “top ranked analyst” and “frequently appears as a TV guest” on CNBC, Bloomberg and CNN.

Masud was arraigned today on the indictment before Supreme Court Judge Anne E. Minihan in Westchester County Court. Bail was set at $500,000 bond over $250,000 cash.

The charges against the defendant are allegations and he is presumed innocent until proven guilty in a court of law.

The Attorney General thanks the Financial Industry Regulatory Authority (FINRA) and, in particular, its Criminal Prosecution Assistance Group for their valuable assistance on this case. The Attorney General also thanks the U.S. Customs and Border Protection, the Port Authority of New York and New Jersey Police Department for their assistance on today’s arrest.

This investigation originated with a complaint filed with the Attorney General’s Investor Protection Bureau.  The investigation was conducted by Investigator Ryan Fannon under the direction of Supervising Investigator John Sullivan and Deputy Chief John McManus. The Investigations Bureau is led by Chief Dominick Zarrella.

The case is being handled by Assistant Attorney General Gabriel Tapalaga of the Criminal Enforcement and Financial Crimes Bureau and John R. Spagna, Special Counsel to the Criminal Division, with the assistance of Legal Analyst Natasha Butalia. The Criminal Enforcement and Financial Crimes Bureau is led by Bureau Chief Gary T. Fishman and Deputy Bureau Chiefs Stephanie Swenton and Meryl Lutsky. The Division of Criminal Justice is led by Executive Deputy Attorney General Kelly Donovan.