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Three arrests were made Wednesday in connection with a hedge fund’s allegedly inflating the value of the mortgage-backed securities it held by as much as $200 million.
The three arrested were Anilesh Ahuja, the CEO of Premium Point Investments; Amin Majidi, a former partner and portfolio manager; and Jeremy Shor, a former trader. The Securities and Exchange Commission also charged the three in civil proceedings. The firm managed as much as $5 billion at its peak.
The U.S. attorney for the Southern District of New York alleged that from at least 2014 to 2016 securities were mismarked, thus fraudulently inflating the net asset value of the firm’s funds. In part that was done by getting brokers to inflate the value, or marks, of bonds, and it also was done by using the spreads of an entire sector rather than the specific security.
The complaint from the U.S. attorney alleges Ahuja, who previously ran Deutsche Bank’s residential-mortgage-backed-securities desk, pressured his team to meet performance targets by instructing traders to “get in there and squeeze the dealers” as well as telling one unnamed trader, “Put on your big boy pants.”
That pressure was felt by Majidi, who reportedly said on a call: “I mean, if we show down 3% this month, game over. ... [The investor] would do a complete redemption.”
According to the complaint, the broker who would mismark the securities for the firm was Frank Dinucci, who, according to Finra’s BrokerCheck, worked at Auriga USA between 2012 and 2015 and AOC Securities between 2015 and 2017.
In 2017, he pleaded guilty to a criminal conspiracy to commit fraud when he was at Nomura Securities, also over mismarking bonds. He’s separately pleaded guilty to charges in this case, as has Ashish Dole, a former chief risk officer, according to the U.S. attorney.
Messages left with attorneys for Ahuja, Majidi and Shor weren’t returned.