A wealthy New Hampshire investment advisor was recently arraigned in the U.S. District Court of New Hampshire on federal charges that he developed a scheme to defraud a Portsmouth client of $1.9 million, according to court documents.

According to federal court records, Karl Hahn of Portsmouth, N.H. promised an unnamed client that his $1.9 million would be used for an investment and yield a profit. According to the complaint, Hahn had no such investment instrument, but took the victim's money for his own personal use.

Federal prosecutors allege Hahn told the man that both of them would invest $1.9 million that would be loaned to three New Hampshire landowners and secured by deeds worth more than $3.8 million.

Agreeing to Hahn's plan, the man transferred loans of $300,000 and $1.6 million to Hahn, according to federal records.
Hahn is alleged to have advised the Portsmouth resident to withdraw $1.9 million from a Deutsche Bank account for the real estate investment to be made by Hahn outside of the bank, which he worked for at the time.

Hahn then allegedly urged the client to keep the deal private and the client deposited $1.9 million into Hahn's father's checking account, according to public records. While the client repeatedly asked Hahn for a written contract to record the cash transfer, Hahn never provided him paperwork for his transaction, according to Bureau of Securities Regulation records, the court documents said.

In 2008, Hahn was charged with allegedly attempting to swindle the Portsmouth client by saying their $3.8 million investment would be paid back in 90 days with a 20 percent return on investment, according to Bureau of Securities Regulation records.

By 2010, the local investor never had his $1.9 million returned and was allegedly asked by Hahn for another $385,000, purportedly to repair real estate properties before they were sold to an Illinois hedge fund, as well as for clerical items. The local client also deposited that money into Hahn's father's checking account, the state alleges.

Meanwhile, a Financial Industry Regulatory Authority  broker check report filed in 2008 says Hahn misrepresented investments to a client and as a result the client was paid a $250,000 settlement. Another complaint was settled for $233,856, according to the report.

On March 2, the New Hampshire Secretary of State suspended Hahn's broker-dealer license, ordered him to show cause why it shouldn't be revoked and to pay yet-to-be determined penalties and fines.

The court complaint also alleges that Hahn made several false representations to the investor and sought to impede him from contacting authorities when his supposed investments never produced any profit.

Hahn's allegedly also told the investor that the supposed borrowers had defaulted on the loans. Hahn retained the deeds to the properties and he contracted with a hedge fund to sell the deeds, according to court papers.

After his arraignment Hahn was released under the following conditions: Hand over his passport; surrender any firearms; not open any credit cards; report regularly to a parole officer, and limit travel to New Hampshire, Connecticut and Florida. His federal trial is set to start Aug. 16.

Hahn's current situation is in stark contrast to his former lavish lifestyle in Portsmouth. He previously lived in a 7,900-square-foot Portsmouth waterfront mansion named "Kafalka View." In front of his mansion Hahn docked his three-bedroom luxury yacht dubbed "Kafalka."

A foreshadowing of Hahn's current legal and financial woes appeared in 2006 when a Portsmouth merchant filed a lawsuit against Hahn in Rockingham, N.H. Superior Court, alleging that he had performed $25,000 in decorating work on Hahn's yacht that he had never been paid for.

-- Jim McConville