May 9, 2018 / 3:56 PM / 4 months ago

Premium Point founder, others charged with inflating assets

NEW YORK (Reuters) - Federal prosecutors on Wednesday charged the founder of New York investment firm Premium Point Investments LP and two former members of the firm with inflating the value of assets held by the firm’s hedge funds by more than $200 million.

In an indictment unsealed in Manhattan federal court, prosecutors charged Premium Point founder Anilesh Ahuja, 49; former partner Amin Majidi, 52; and former trader Jeremy Shor, 46 with securities fraud, wire fraud and conspiracy. The U.S. Securities and Exchange Commission also announced related civil charges against them.

Seth Rosenberg, a lawyer for Majidi, declined to comment on the charges. Lawyers for Ahuja and Shor could not immediately be reached.

The three men were taken into custody Wednesday morning and are expected to appear in Manhattan federal court later in the day, according to prosecutors.

Premium Point, which specialized in mortgage-related investments through hedge and private equity funds, managed assets valued at more than $5 billion at its peak, according to prosecutors. It filed for bankruptcy in March, court records show.

Ahuja founded the firm in 2008 after a four-year stint as the head of the mortgage-backed securities group at Deutsche Bank AG.

Authorities said that from about 2014 to 2016, Ahuja, Majidi and Shor engaged in a scheme to mark up the value of assets held by hedge funds managed by Premium in reports to investors and potential investors.

The defendants obtained the inflated values in part by getting fraudulent quotes on securities from “corrupt brokers,” according to the indictment.

When an unnamed person at the firm confronted Ahuja and Majidi about pressure to inflate values, Ahuja told the person to “put on your big boy pants,” the indictment said. The person eventually resigned, according to the indictment.

After its auditor questioned its valuations in 2015, Premium Point told investors it had overvalued all of its funds by 13 percent to 15 percent from September 2015 to March 2016, prosecutors said.

The mismarking was even more serious in Premium’s flagship mortgage credit hedge fund, which was mismarked by 24 percent, and dated back to at least January 2014, the prosecutors added.

Prosecutors also announced Wednesday that Ashish Dole, a former risk officer at the firm, and Frank Dinucci, a former broker-dealer, had already pleaded guilty to related charges and agreed to cooperate with authorities.

Reporting By Brendan Pierson in New York; Additional reporting by Jonathan Stempel in New York; Editing by Chizu Nomiyama and Andrea Ricci

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