Armonk Man Accused In Hedge Fund Fraud: FBI

ARMONK, NY — A former hedge fund portfolio manager was arrested at his home in Armonk Wednesday by FBI agents. He's one of three people accused of defrauding clients of Premium Point Investments, LC by cooking the books. Prosecutors also on Wednesday unsealed an indictment against a White Plains man, who with another former conspirator has pleaded guilty and is cooperating with the government in the case.

According to Audrey Strauss, the Attorney for the United States, Amin Majidi, a former partner and portfolio manager at the firm, which managed hedge funds focused on structured credit products, participated in a scheme to commit securities fraud and wire fraud.

Majidi was arrested along with Anilesh Ahuja, a/k/a “Neil,” the founder, chief executive officer, and chief investment officer, and Jeremy Shor, a former trader at the firm.

The conspiracy, from in or about 2014 through in or about 2016, had to do with mis-marking certain securities held in hedge funds that the firm managed. At its peak, the mis-marking across all funds managed by the firm exceeded $200 million, prosecutors said.

“The defendants’ alleged practice of intentionally misleading investors and mismarking securities held in the funds they managed allowed them to charge higher fees and hold captive money that would have likely been withdrawn had their clients been aware of the hedge fund’s actual value," FBI Assistant Director William F. Sweeney Jr. said in the announcement. "Their initial success was based on self-imposed target returns, supported by reverse engineering tactics, but in the end, they missed their mark.”

Prosecutors alleged the conspirators mis-marked the value of securities in their funds to inflate their worth.

The mismarking scheme evolved as a result of demands by Ahuja and Majidi that the Firm 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, prosecutors said, Ahuja and Majidi set an inflated “target” return for the Hedge Fund at the end of each month, which was based in part on the performance of peer funds. As part of the scheme, Majidi, frequently in the presence of Ahuja, directed the members of the trading desk, including Shor, Dole, and others, that the Firm must meet its “target” performance number for the month. The traders at the Firm were then tasked with “reverse engineering” marks to meet the targets.

Ahuja, 49, of New York City, Majidi, 52, of Armonk, and Shor, 46, of New York City, are each charged with four counts: one count of conspiracy to commit securities fraud; one count of conspiracy to commit wire fraud; one count of securities fraud; and one count of wire fraud. Count One carries a maximum sentence of five years in prison, and Counts Two through Four each carry a maximum sentence of 20 years in prison.

The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.

Strauss also announced the unsealing of charges against Ashish Dole, a former chief risk officer and trader at the firm, and Frank DiNucci, Jr., a former salesman at a broker-dealer.

On Nov. 13, 2017, Dole, 34, of White Plains, New York, pleaded guilty to two counts: one count of conspiracy to commit securities fraud and wire fraud; and one count of securities fraud. Count One carries a maximum sentence of five years in prison, and Count Two carries a maximum sentence of 20 years in prison. The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.

On April 6, 2017, DiNucci, 35, of New York City, pleaded guilty to four counts: one count of conspiracy to commit securities fraud and wire fraud; one count of securities fraud; one count of wire fraud; and one count of making false statements. Counts One and Four each carry a maximum sentence of five years in prison, and Counts Two and Three each carry a maximum sentence of 20 years in prison. The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.

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 respective judges.

Strauss praised the work of the FBI and thanked the SEC for its assistance.

IMAGE/ Renee Shiavone