NYC Indian Anilesh Ahuja
Convicted of Securities Fraud
July 11, 2019 - Hedge fund founder, CEO & CIO Anilesh Ahuja (51) and former trader Jeremy Shor (44) of Premium Point Investments (PPI) were found guilty today of securities fraud-related offenses in Manhattan federal court.
Anilesh Ahuja (Photo Courtesy: News Media Sources)
According to the Indictment and evidence presented at trial:
In or about 2008, AHUJA co-founded PPI, where he was the chief executive officer and chief investment officer. PPI managed hedge funds focused primarily on structured credit products, including residential mortgage backed securities (“RMBS”). PPI’s flagship mortgage credit fund (the “Hedge Fund”) was launched in or about October 2009. A segregated ERISA fund held the same positions as the Mortgage Credit Fund. 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. At various relevant times between 2008 and 2016, PPI managed billions in assets. JEREMY SHOR was employed by PPI as a trader, where he focused on non-agency RMBS – i.e., RMBS securities that were not issued by a government agency.
The Scheme to Mismark Securities
From at least in or about 2014 through at least in or 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 of certain securities held in these funds, and thus fraudulently inflating the NAV of those funds as reported to investors and potential investors.
PPI fraudulently obtained inflated quotes, including from corrupt brokers, and manipulated its valuation process to inflate the purported value of securities held by the funds. The effect of the mismarking scheme was to materially overstate the reported NAV – at times by more than $100 million across the funds managed by PPI. This benefited PPI in at least two ways. First, PPI was able to charge its investors higher management and performance fees. Second, the PPI was able to forestall redemptions by investors who would have requested a return of their funds had they known PPI’s true performance and operating health.
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.”
Guilty Counts and Potential Penalty
Anilesh Ahuja and Jeremy Shor were each found guilty on all four counts of the indictment:- One count of conspiracy to commit securities fraud
- One count of securities fraud
- One count of conspiracy to commit wire fraud
- One count of wire fraud
And, one count each of securities fraud, conspiracy to commit wire fraud, and wire fraud carry a maximum potential sentence of 20 years in prison.
Important
The above mentioned maximum potential sentences are prescribed by Congress and are provided for informational purposes only.
The actual sentencing of the Anilesh Ahuja and Jeremy Shor will be determined by the Manhattan federal court judge.