Premium Point Investments Founder And CEO Anilesh Ahuja Sentenced To 50 Months In Prison Following Conviction At Trial For Securities Mismarking Scheme

Audrey Strauss, the Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that ANILESH AHUJA, a/k/a “Neil,” the founder, chief executive officer, and chief investment officer of Premium Point Investments L.P. (“PPI”), was sentenced to 50 months in prison in connection with his conviction following a jury trial for engaging in a securities mismarking scheme from 2014 to 2016.  The jury convicted AHUJA and Jeremy Shor, a former trader at PPI, on securities fraud-related offenses relating to their participation in a scheme to inflate the net asset value (“NAV”) reported to investors for hedge funds managed by PPI by more than $100 million.  AHUJA was sentenced by U.S. District Judge Katherine Polk Failla, who presided over the six-week jury trial.  

Ms. Strauss said:  “Anilesh Ahuja, founder of Premium Point Investments, was convicted of participating in a scheme to mismark securities and thereby mislead investors as to the true value of the funds that Premium Point managed.  Ahuja conspired with others in his company and corrupt brokers to fraudulently inflate the value of the assets under their management, which in turn allowed them charge higher fees and avoid redemptions by investors who otherwise would have pulled their money from Premium Point.  The substantial prison term imposed on Ahuja appropriately holds him accountable for his criminal acts.”

According to the Indictment, evidence presented at trial, and court filings:

Premium Point Investments

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.  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, ERISA 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, 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, ERISA 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.”

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In addition to the prison term imposed by Judge Failla, AHUJA, 51, of New York, New York and Miami, Florida, was further sentenced to three years of supervised release.

On November 18, 2019, Judge Failla sentenced Shor to 40 months’ imprisonment and three years of supervised release.

Ms. Strauss praised the work of the Federal Bureau of Investigation, and thanked the Securities and Exchange Commission for its assistance. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Andrea M. Griswold, Joshua A. Naftalis, and Max Nicholas are in charge of the prosecution.