N.Y. Indian-American hedge fund founder convicted of $100 million securities fraud scheme

Anilesh "Neil" Ahuja, co-founder and chief executive officer of Premium Point Investments LP, arrives at federal court in New York, U.S., June 3. (Getty Images)

An Indian-American hedge fund founder of a Manhattan-based investment firm was convicted July 11 along with a former trader for participation in a scheme to inflate the net asset value (“NAV”) reported to investors for hedge funds managed by his firm by more than $100 million.

Prosecutors said Anilesh Ahuja, a/k/a “Neil,” the founder, chief executive officer, and chief investment officer of Premium Point Investments LP, (PPI) a Manhattan-based investment firm that managed hedge funds, and Jeremy Shor, a former trader at PPI, were found guilty of securities fraud-related offenses.

Ahuja and Shor were convicted after a six-week trial in Manhattan federal court presided over by U.S. District Judge Katherine Polk Failla.

Ahuja, 51, of New Rochelle, New York, and Shor, 44, of New York, were each found guilty on all four counts of the indictment, including one count of conspiracy to commit securities fraud, which carries a maximum potential sentence of five years in prison, and one count each of securities fraud, conspiracy to commit wire fraud, and wire fraud, each of which carries a maximum potential sentence of 20 years in prison.

According to a release by the U.S. Attorney’s Office for the Southern District of New York, the PPI co-founded by Ahuja, managed hedge funds focused primarily on structured credit products, including residential mortgage-backed securities (“RMBS”).

In or about 2008,Ahuja and Shor participated in a scheme to defraud PPI’s investors and potential investors in the Hedge Fund and the New Issue Fund by deceptively “mismarking each month the value of certain securities” held in these funds, and thus fraudulently inflating the NAV of those funds as reported to investors and potential investors.

PPI’s flagship mortgage credit fund (the “Hedge Fund”) was launched in or about October 2009. A segregated ERISA fund (Employee Retirement Income Security Act) held the same positions as the Mortgage Credit Fund.

The prosecutor said in 2013, PPI launched a new fund (the “New Issue Fund”) that purchased and securitized pools of mortgages that were not issued or guaranteed by a government agency.

The prosecutor said between 2008 and 2016, PPI managed billions in assets. Shor was employed by PPI as a trader, where he focused on non-agency RMBSthat were not issued by a government agency.

From at least in or about 2014 through about 2016, Ahuja and Shor participated in a scheme to defraud PPI’s investors and potential investors in the Hedge Fund and the New Issue Fund by deceptively mismarking each month the value ofcertain securities held in these funds, reporting to investors fraudulently-inflated NAV.

“Investors in our markets must be able to count on the truth and accuracy of the information they receive from those they entrust with their money. As the jury’s verdict reflects, Ahuja and Shor failed to live up to that fundamental responsibility and investors lost significant money as a result,” Audrey Strauss, Deputy U.S. Attorney for the Southern District of New York said.

The mismarking scheme evolved as a result of demands by Ahuja that PPI maintain its track record of success and keep pace with the performance of peer funds, regardless of market conditions or the actual performance of the funds.

To achieve the goal of posting competitive returns, Ahuja, along with another partner, set an inflated “target” return for the Hedge Fund and New Issue Fund at the end of each month, which was at times based in part on the performance of peer funds. The traders at PPI were then tasked with “reverse engineering” marks to meet the “targets.”

Ahuja and Shor will be sentenced by Judge Faillaat a future date.

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