Authorities arrested the founder and two ex-employees of hedge fund Premium Point Investments Wednesday, on criminal charges of fraud and conspiracy, according to federal prosecutors.
The Securities and Exchange Commission also announced civil charges against founder Anilesh Ahuja, former partner Amin Majidi, and former trader Jeremy Shor, alleging that they overvalued assets in the portfolio by hundreds of millions of dollars, thus falsifying fund returns and charging excess fees.
New York City-based Premium Point focused on structured credit, primarily liquid U.S. residential mortgage-based securities, according to a write-up for the 2014 Skybridge Alternatives Conference (SALT), which it sponsored.
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At the hedge fund firm’s peak, it managed upwards of $5 billion, the Justice Department’s indictment stated. Ahuja founded Premium Point in 2009, and the company posted strong double-digit returns in the early years.
But the firm’s investments began to falter, and Ahuja “allegedly manipulated the firm’s performance numbers, using fraudulently inflated values for the firm’s securities holdings and lying to investors about how the firm would mark its positions,” U.S. Attorney Audrey Strauss said in a May 9 statement. “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.”
In 2016, Premium Point suspended redemptions while it prepared to restate its net asset values.
The former website for Premium Point is now a blank page.
Ahuja, Shor, and Majidi have each been charged with four counts in the criminal case: conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud, and wire fraud. The first carries a maximum five-year prison sentence, while the latter three could each result in up to 20 years.