A New York hedge fund founder was arrested Wednesday on charges that he exaggerated his company's performance by over $200 million to impress and preserve investors.
Anilesh Ahuja, 49, of Manhattan, was charged with conspiracy, securities fraud and wire fraud.
Federal officials said that the founder, chief executive officer and chief investment officer of the investment firm Premium Point Investments LP had carried out a fraud from 2014 through 2016 that was designed to make investors believe that the firm's hedge funds were doing much better than they were. Between 2008 and 2016, the firm managed billions of dollars in assets, exceeding $5 billion at one time at its peak, authorities said.
Amin Majidi, 52, of Armonk, New York, a former Premium Point portfolio manager, and Jeremy Shor, 46, of Manhattan, a former trader at the firm, also were charged. A lawyer for Ahuja did not immediately comment. A lawyer for Majidi declined comment. An attorney for Shor did not immediately return a message.
“By allegedly cooking the books, Ahuja and his co-defendants made the fund appear more attractive to would-be investors and dissuaded current investors from withdrawing their investments,” said Audrey Strauss, a federal prosecutor.
William F. Sweeney Jr., head of the New York FBI office, said in a release that the defendants’ “alleged practice of intentionally misleading investors and mismarking securities held in the funds they managed allowed them to charge higher fees and hold captive money that would have likely been withdrawn had their clients been aware of the hedge fund’s actual value.”
According to an indictment, Ahuja started his firm in 2008 and launched the company’s flagship mortgage credit fund a year later. After the firm began overstating the net asset value of its funds by more than $200 million at times, it was able to charge investors higher management and performance fees and could forestall redemptions, authorities said.
Prosecutors also announced Wednesday that the firm’s former chief risk officer and a former salesman at a broker-dealer have pleaded guilty to charges and are cooperating.
The Securities and Exchange Commission also filed civil charges against Ahuja, Majidi and Shor.
“Investors rely on their investment advisers to fairly and accurately value securities, and that is especially true when the securities trade in opaque markets,” said Daniel Michael, chief of the SEC’s Complex Financial Instruments Unit. “As we allege, Premium Point masked its true performance, which denied investors the opportunity to make informed investment decisions.”