New Rochelle Man Convicted of Securities Fraud Related Offenses in New York Court

Written By: Robert Cox

NEW YORK, NY — Anilesh “Neil” Ahuja, the founder, chief executive officer, and chief investment officer of Premium Point Investments LP, a Manhattan-based investment firm that managed hedge funds, and Jeremy Shor, a former trader at PPI, were found guilty today of securities fraud-related offenses.  Abuja and Shor were convicted after a six-week trial in Manhattan federal court presided over by U.S. District Judge Katherine Polk Failla, for their participation in a scheme to inflate the net asset value reported to investors for hedge funds managed by PPI, by more than $100 million.

Ms. Strauss said:  “Investors in our markets must be able to count on the truth and accuracy of the information they receive from those they entrust with their money.  As the jury’s verdict reflects, Ahuja and Shor failed to live up to that fundamental responsibility and investors lost significant money as a result.”

According to the Indictment and based on the evidence presented at trial:

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.   PPI’s flagship mortgage credit 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 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, Abuja 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.  MSecond, 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.”

Ahuja, 51, of New Rochelle, New York, and Shor, 44, of New York, New York, were each found guilty on all four counts of the indictment: one count of conspiracy to commit securities fraud, which carries a maximum potential sentence of five years in prison, and one count each of securities fraud, conspiracy to commit wire fraud, and wire fraud, each of which carries a maximum potential sentence of 20 years in prison.

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Abuja and Shor will be sentenced by Judge Failla at a future date.

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 United States Attorneys Andrea M. Griswold, Joshua A. Naftalis, and Max Nicholas are in charge of the prosecution.