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Post date: February 25 2015

A.G. Schneiderman Announces Conviction Of New Jersey Broker Arrested In $1 Million Securities Fraud Case

After His Arrest Just Two Weeks Ago, Khawaja Saud Masud Pleads Guilty To Fraudulently Soliciting His Relatives To Invest In His Purported Hedge Fund

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

WESTCHESTER - Attorney General Eric T. Schneiderman announced the felony conviction of Khawaja Saud Masud, 37, of Jersey City, NJ, for stealing over $1 million from his great-uncle and great-aunt by fraudulently soliciting them to invest in his purported hedge fund, RKS Capital, LP. Today, just two weeks after being charged by the Attorney General’s Office, Masud pleaded guilty to Grand Larceny in the Fourth Degree and Securities Fraud under the Martin Act, both Class E felonies. In exchange for his plea, Masud must pay a total of $500,000 in restitution. As a result of his conviction, Masud also faces deportation.

“The defendant convinced his own relatives to turn over their retirement savings with promises of a safe, lucrative investment. Instead, he squandered away their money with a risky strategy that could only benefit himself,” said Attorney General Schneiderman. “My office will pursue justice from brokers who fraudulently solicit investors and commit securities fraud.”

Masud was charged by the Attorney General’s Office on February 13, 2015 with Grand Larceny in the Second Degree, a Class B felony, and Securities Fraud under the Martin Act. According to the indictment and statements made by prosecutors, Masud induced his relatives, Dr. Kalim Irfani, a 75-year old retired pediatrician, and his wife, Rehana Irfani, of Westchester, to invest with him by falsely representing that his purported hedge fund RKS Capital, LP was a far safer investment than a mutual fund. Instead, Masud engaged in a highly speculative and aggressive investment strategy, trading stocks multiple times a day without his relative’s knowledge or permission, suffering staggering losses.

As part of his guilty plea, entered today before the Honorable Justice Robert A. Neary in Westchester County Court, Masud admitted to making multiple false representations to the Irfanis to convince them to invest, including that he would safely invest their money, that he would preserve their $1 million investment, and that their investments would be transparent and monitored by an independent third-party administrator.

Masud further admitted that contrary to his representations to the Irfanis, he invested their money in a manner that he knew was unsafe and would not preserve their investment, and that he cancelled the services of the fund administrator who was responsible for sending monthly statements to the Irfanis. Masud admitted that he instead engaged in a risky trading strategy that was intended to benefit himself, and that as a result of his actions, he lost over $900,000 of the Irfanis’ investment in just three months.

Masud, who already repaid approximately $200,000 to the Irfanis, must pay an additional $300,000 in restitution to the Irfanis as a condition of his plea. As a result of his conviction in this case, Masud, who is not a United States citizen, now faces deportation to his native county of Pakistan.

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

Masud is scheduled to be sentenced on March 4, 2015.

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 this case.

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.