Premium Point Investments CEO Anilesh Ahuja gets 50 months in prison for RMBS, securities fraud

Mortgage & Real Estate

The founder and CEO of a New York investment firm will spend
more than four years in prison after being convicted of lying about the value
of hedge funds that included residential mortgage-backed securities.

The Attorney’s Office for the Southern District of New York announced this week that Anilesh Ahuja, the founder, chief executive officer, and chief investment officer of Premium Point Investments, was sentenced to 50 months in prison after being convicted of engaging in a securities mismarking scheme.

According to the Attorney’s Office, Ahuja and Jeremy Shor, a former trader at Premium Point who focused on non-agency RMBS, participated in a scheme to overinflate the net asset of the value of firm-managed hedge funds by more than $100 million between 2014 and 2016.

Court documents show that Ahuja co-founded PPI in 2008. The
company managed hedge funds that primarily focused on structured credit
products, including residential mortgage-backed securities.

One of PPI funds, launched in 2013, focused on purchasing
and securitizing pools of mortgages that were not issued or guaranteed by a
government agency.

According to court documents, from at least 2014 through
2016, Ahuja and Shor participated in a scheme to defraud PPI’s investors and
potential investors in the company’s various funds by “deceptively mismarking
each month the value of certain securities held in these funds, and thus
fraudulently inflating the (net asset value) of those funds as reported to investors
and potential investors.”

In order to accomplish this, 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
U.S. Attorney’s Office stated.   

These actions allowed PPI to materially overstate the
reported net asset value of the funds by more than $100 million, which
benefited the firm in two ways.

First, the firm was able to charge its investors higher
management and performance fees. Second, the firm was able to delay investors who
would have requested their money back had they known about the funds’ true
performance and operating health.

According to court documents, the scheme was conducted as a
result of Ahuja demanding that the firm maintain its image of success and “keep
pace” with the performance of other similar funds, despite market conditions
and the actual performance of the funds.

As a result of the scheme, Ahuja was sentenced to 50 months
in prison, while Shor received a sentence of 40 months. Both Ahuja and Shor
will also be required to serve three years of supervised release upon the
termination of their prison sentence.

“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,”
U.S. Attorney Audrey Strauss said in a release.

“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,”
Strauss continued. “The substantial prison term imposed on Ahuja appropriately
holds him accountable for his criminal acts.”
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